Today many people have become very skeptical about the current market and economy when it comes to saving for retirement. In fact the market seems to have become very volatile over the last few years and some are wondering what they could do to protect themselves today. While you can’t control what the market is going to do you can control where you invest your money and the fees that you pay and in this article we’re going to see which is better fee based investing or traditional investing.
The Traditional Way To Invest
For most people we invest our money in mutual funds. However, most mutual funds will contain as many as three main fees that could cost you a lot over the years. The first fee is the sales charge fee. This fee can run as much as 5% to 6% of every dollar you invest into the account. So if you invest $1000 and have a 5.5% sales charge you will end up paying around $55 in fees upfront.
The second fee that you will have to pay is an annual fee to maintain the account. The money from this fee will go to pay the fund manager, and make trades within the fund itself. Typical fees will range from as little as 0.19% to as high as 1.48%.
Finally, the last fee you may have to pay is a 12b-1 fee. This fee is a junk fee that goes to pay for advertising cost in most cases; however my suggestion is to stay away from these companies that charge this fee.
Fee Based Investing
Mutual funds can still be a good investment option but the problem with them is once you’ve set up the account and invested your money you won’t typically hear much from the representative after that. In fact most of them will enter the witness protection program never to be seen or heard from again because they’ve made their money and moved on.
So you might be wondering what is the best way to go then? The answer is investment advisers. An investment advisor is different because they are fee based and charge a flat fee up front. This fee typically runs around 2% annually. So if you have $10,000 in your account you could pay $200 over the course of a year’s time. On top of that the investment adviser has a vested interest in your account to earn more, because if when you earn more they will earn more as well.
Where To Get Started
So now that we know the difference between traditional investing and fee based investing you might be wondering where should I get started? One of the best IRA companies that does fee based investing is Foxhall Capital. This company deals within a global market place and believes that their is always a bull market somewhere in the world, and as a result they are always striving to keep you there.
So what are your thoughts, is fee based investing better or is it better to stick with the traditional method such as mutual funds?
- Stock Carnival Ecstasy – October 4, 2011 (fastswings.blogspot.com)
- Passive and Active Investing (fastswings.com)