Investing Tips for Millennials - Keep Investing Fees to a Minimum

Before you purchase any managed mutual fund, index fund or exchange-traded fund understand the fees that the fund charges. Some funds charge a one-time sales fee (called load) when you buy and sell the fund.

All funds charge an annual fee that is a percentage of the current dollar value of your holdings. Annual fees can be as low as 0.10 percent for passively-managed index funds or nearly two percent or more for some actively-managed funds.

Annual fees are particularly onerous because the dollar amount that you pay increases as the value of your holdings increases.

Assume that you invested $10,000 and hold it for 30 years at 6 percent return. With no fees, you would have $57,434.91. With a two percent annual fee, you would accumulate $31,329.84, a 45.45 percent reduction. So the two percent annual fee cut your total return almost in half! Even a one percent fee can significantly reduce your return.

Use the Investment Fee Calculator to see the effect of fees on total returns.

Related Articles

Investing Tips for Millennials - Buy and Hold Dividend-Paying Stocks

Investing Tips for Millennials - Reinvest Dividends

Investing Tips for Millennials - Save and Invest Regularly

Investing Tips for Millennials - Simplify Investing - Own the S&P 500

Portfolio of Buy-and-Hold Stocks for Millennials