I am worried about investments cost, what’s normal and acceptable? Kay from Monroe, WI
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I am worried about investments cost, what’s normal and acceptable?
Cost seems pretty simple, right? You don’t want to pay more for something then you should. But it’s not just as cut and dry in that it’s not always the cheapest; it’s the best. You’ve probably known that from just buying things as a consumer. Cheaper doesn’t always mean better. Just in the same way, more expensive doesn’t always mean the best quality. It’s getting value for what you’re paying for.
So when we talk about costs and how that can trip us up, I want to talk about two different kinds. One is the cost of things that are unnecessary, meaning we’re paying for something that we don’t need. I always think about it like this; I have the cable package with Direct TV, and I really don’t need half of these channels on there. I only want some of the kid channels and the sports channels. But in order to get them all, I have to pay for all these
The second is paying and not getting the right service. Again, I said cheaper doesn’t always mean better. It doesn’t mean you choose the fund that has the actual lowest fee ever. It means that you’re getting value for what you’re paying for. You should know what your fees are paying for and what you’re getting out of that.
For example, you can pay a really low fee for an index mutual fund that will track the index performance very closely. If you are ok with the volatility and returns of that index than that could be a good option. However, if you want to lower risk and volatility, then you may need to pay more for a manager to do so. If that manager doesn’t accomplish that, then you are not receiving something of value for the higher cost.
It’s like it reminds me of paying a teenager to mow my yard this summer. I pay them, say, “There’s so much to mow the yard.” I came home, and he had botched the yard. It took me longer to clean up all the grass, because he cut it so low than it did for him to mow. That’s not a valuable service. Why would we want to pay for somebody to do something that they really didn’t do, or they’re not doing well?
When it comes to costs, we want to make sure the costs are reasonable and that we’re not paying for things that we don’t need, but we also want to make sure we’re getting value for what we’re paying for. If you don’t know what you’re paying for, it’s something that we need to be able to ask. What am I paying for? If you can’t get a clear answer on how much a fee is and what all that fee is covering, do you feel like you’re getting the valuable service for that?
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Michelle Bertram and Beverly Bertram are financial advisors living in Mineral Point WI and serving the surrounding communities. Michelle Bertram does financial planning for retirees along with business consulting. Beverly Bertram specializes in retirement planning and income planning for her clients. Michelle Bertram and Beverly Bertram are authors of the book, Creating You DREAM Retirement and creators of the DREAM Retirement Process.
Serving Madison WI, Verona WI, Mount Horeb WI, Barneveld WI, Dodgeville WI, Dubuque IA, Platteville WI, Lancaster WI, Cuba City WI, Fennimore WI, Darlington WI, Monroe WI, Spring Green WI, Black Earth WI and beyond.