The Securities Exchange Commission (SEC), Investor Bulletin on fees and expenses reminds investors about the effect fees on investment accounts can have on a portfolio over the long run. According to the SEC Investor Bulletin, “These fees may seem small, but over time they can have a major impact on your investment portfolio.” The SEC’s Office of Investor Education illustrates the effects through the use of a graph. In the hypothetical example, a $100,000 portfolio is assumed to grow 4% annually with annual fees of 0.25%, 0.50% and 1.00% that are deducted over a 20-year period. The differences between the account values at the end of period show a $30,000 disparity in portfolio values between the portfolios with 1.00% and 0.25% in annual fees deducted from the respective portfolios. This simplistic example should make investors wary about the fees they are paying, whether disclosed or not, these fees can greatly diminish any retirement nest egg.
The SEC Investor Bulletin urges investors to “get informed” by reviewing account statements, confirmations and investment prospectuses to become better informed. The bulletin also provides helpful questions investors should ask their financial advisors before investing:
What are all the fees relating to this account?