How to Avoid Investment Fees (2024)

FAQs

Why is it important to minimize fees associated with investing? ›

This is particularly true over time, because not only is your investment balance reduced by the fee, but you also lose any return you would have earned on that fee. Over time, even ongoing fees that are small can have a big impact on your investment portfolio.

Answer: From a regulatory perspective, it's usually prohibited to ever charge more than 2%, so it's common to see fees range from as low as 0.25% all the way up to 2%, says certified financial planner Taylor Jessee at Impact Financial.

Escaping the Fidelity Recordkeeping Fee can be achieved through strategic actions such as closing the account, seeking fiduciary services, and considering alternatives to minimize financial obligations. Closing the account is a straightforward approach to avoid the fee entirely.

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Reduction of Brokerage Fees to Zero

Investors can reduce account maintenance fees by comparing brokers, their provided services, and their fees. Buying no-load mutual funds or fee-free investments can help avoid per-trade fees.

Choosing low-cost mutual funds, going with passive investments like an ETF or an index fund, and being aware of how much you are paying in fees can go a long way toward reducing the amount you pay to invest.

A reasonable expense ratio for an actively managed portfolio is about 0.5% to 0.75%, while an expense ratio greater than 1.5% is typically considered high these days. For passive funds, the average expense ratio is about 0.12%.

Investment fees cover important costs to ensure your investments are managed well, but they can also have a big impact on your investment performance over the long run.

While 1.5% is on the higher end for financial advisor services, if that's what it takes to get the returns you want, then it's not overpaying, so to speak. Staying around 1% for your fee may be standard, but it certainly isn't the high end. You need to decide what you're willing to pay for what you're receiving.

Generally, having between $50,000 and $500,000 of liquid assets to invest can be a good point to start looking at hiring a financial advisor. Some advisors have minimum asset thresholds. This could be a relatively low figure, like $25,000, but it could $500,000, $1 million or even more.

What does Charles Schwab charge for a financial advisor? ›

Schwab and CSIM are subsidiaries of The Charles Schwab Corporation. There is no advisory fee or commissions charged for Schwab Intelligent Portfolios.

Fidelity's robo advisor is better for investors who are getting started, but Schwab may be more affordable if you have a higher balance. Passive investors can pick either firm, but if you want to take a more active, trading-based approach, Schwab's Thinkorswim platform is hard to beat.

For the investor, index funds and ETFs offer a number of attractive features. They generally have lower management and transaction costs than actively managed funds. They typically do not have sales charges (loads) that many mutual funds have.

There is no advisory fee for accounts with less than $25,000. Investments of $25,000 or more are charged 0.35% per year, but that level gets you unlimited one-on-one financial coaching sessions.

To completely avoid fees, notice whether there is a fund redemption fee, which is often charged to investors who sell shares less than 180 days after buying them. These fee-free mutual funds typically have minimums set by the mutual fund company or the brokerage firm.

But, if you're already working with an advisor, the simplest way to determine whether a 1% fee is reasonable may be to look at what they've helped you accomplish. For example, if they've consistently helped you to earn a 12% return in your portfolio for five years running, then 1% may be a bargain.

Here's a breakdown of what's included in each: Management fee: This fee is what you pay to the fund manager or the team of investing professionals who make sure the fund achieves its investing objective and performs well. Typically, this fee falls between 0.5% and 2% of the assets being managed.

Can I negotiate the percentage I pay my adviser? The short answer is yes. Ken Robinson, certified financial planner at Practical Financial Planning, says while a 1% fee may be common, advisers who charge based on AUM are increasingly scaling down from 1% at lower thresholds in the past.