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Excessive Investment Expenses Take 2% of Individual Investor Assets Every Year

Find VERIPLAN:   Do-It-Yourself Lifetime and Retirement Financial Planning Software

Excessive investment expenses take 2% of individual investor’s assets every year

Year after year, millions of people lose large amounts of money on unnecessary and unproductive investment costs and investment expenses.

The typical investor loses about 2% of portfolio assets every year by paying too much and getting too little in return.

This wasted 2% is not a percentage of your investment returns. It is a percentage of your financial assets — money that is already yours. What right does anyone have to a percentage of your assets every year, unless he or she actually contributes to growing your money more than you pay out in fees and other costs? (See: Excessive investment costs are a huge problem for individual investors and The investment industry is not your investment partner)

VeriPlan helps you to improve your decision making related to investment expenses in two primary ways. First, you cannot decide to make changes, until you clearly recognize that there is a problem. Therefore, VeriPlan and The Skilled Investor website and blog educate you about the findings of the scientific investment research literature on investment costs. These findings are diametrically opposed to many of the things that the financial services industry tells you that you should do.

Implicitly or explicitly, the financial services industry tells you to spend more on their services so that you get higher returns. On the contrary, the scientific finance literature tells you to spend less on fees and other expenses so that you can get higher returns. The scientific literature is right, and the industry is wrong. However, most people do not yet understand this. They keep paying excessive costs, and they keep getting suboptimal returns. (See: Passive individual investors are “free riders” who benefit from the higher costs of active traders)

Second, VeriPlan fully automates the modeling and analysis of your total lifecycle investment costs. VeriPlan allows you easily to compare lifecycle financial plans that use either the investment cost characteristics of your current portfolio or alternate investment costs that you think are reasonable to pay. VeriPlan automatically measures your personal lifecycle costs for: 1) fees to buy investments (e.g. front-end purchase “loads”), 2) investment portfolio management fees (e.g. the management expense ratio), 3) marketing and sales fees (e.g. 12b-1 fees for investment funds), 4) trading costs (e.g. trading costs, which are indicated by rates of portfolio turnover), and 5) personal account custody fees, commissions, and advisory fees. (See: VeriPlan helps you to understand the full lifecycle cost to you of excessive investment expenses)

If your investment cost strategy is already highly efficient, then VeriPlan will demonstrate this to you. However, if you are like most people, VeriPlan will quantify for you how much would squander of your future financial well-being by continuing to pay excessive investment costs.

It is hard to overstate that excessive investment costs are such a serious issue to individuals. In VeriPlan, when you compare a low cost investment strategy with an average investment cost strategy for a young middle-class professional couple, the differences in future cash, bond, and stock portfolio values are staggering. For example, leaving all other projection assumptions the same, a low cost investment strategy could lead to a million dollar financial asset estate at age 100, while paying average investment costs could lead to bankruptcy by age 90. Which road would you take?

VeriPlan starkly illustrates just how much you personally could waste on excessive investment fees. For this couple, the value difference exceeds $1,000,000 in current purchasing power dollars. That is not a bad return on an $39.95 personal financial lifecycle planner!

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