Low Fees Matter


It is almost impossible to overstate the importance of low fees in investing. A difference of 1% in fees over an investment lifetime can add 10 years of work to retirement. A difference of 2.5% in fees over an investment lifetime can deplete 70% of your retirement savings. You understanding this one simple fact that low fees matter is critical to your financial success: hundredths of a percent matter in financial fees.



This graphic is for illustrative purposes only and is purely hypothetical. The y-axis represents total portfolio value net of all fees, while the x-axis represents years assuming a 7% annual return, across three different annual fee rates. Calculations assume fees are paid on an annual basis in arrears based on a percent of the year-end portfolio value.


When considering why low fees matter, research shows it is ironically fees themselves that drive underperformance of actively managed funds.

Financial advisors are allowed to receive compensation from funds they sell to you as sales charges. Amazingly, this blatant conflict of interest is legal. These may be disclosed in very fine print where you are likely to miss them. Be aware that this is going on, and you are the one paying for it.

"Do you really want to invest in a system where you put up 100% of the capital and as the mutual fund shareholder you take 100% of the risk, and you get 30% of the return?" ~ John Bogle, on mutual funds.

2.5% in aggregate fees may not seem like much, but consider a hypothetical case where your investments return 6% annually over the next decade. This 2.5% would be almost 42% of your returns in the first year! But it gets worse. Because of the compound curse of fees, this 42% won't be making money for you next year, and the following year, and so on. This is how fees compound to erode your retirement savings in a significant way and emphasizes why low fees matter.

"In investing, you get what you don't pay for. Costs matter." ~ John Bogle

The effect of this is a slow grinding away of your assets. You don't want this when you are starting to invest and your asset base is relatively small, as it will face headwinds in growing large. And you don't want this if you are wealthy, as these small percentages equate to huge dollars.

"About the only thing that's changed on Wall Street is that computers have replaced pencils and graph paper. Otherwise, the basics are the same. The investor's need to believe somebody is matched by the financial advisor's need to make a nice living. If one of them has to be disappointed, it's bound to be the former." ~ John Rothchild, Financial Columnist, Time magazine

And now some good news.

We're going to work hard to show you how the low fees you pay us are earned in your portfolio strategy. Here is an example: in recent years, certain index funds that we use have been paying their owners to own them. Their fees are negative. This is due to the fact that active short sellers borrow shares from these indexes and have to pay them. This results in the index fund actually doing slightly better than the index it tracks! This effect doesn't exist everywhere and it may be temporary, but it's a good example of why choosing a large, liquid industry-standard fund can matter.
Read more about this interesting effect.

And more good news.

Take a look at our fees page. We think our low fees fall in the category of refreshingly good news.


Please enter a first name.
Please enter a last name.
Please enter an email address.
1000 characters remaining
Please enter a message.
How We Are Different
Low-fee index funds. Transparent & fiduciary financial advisors.
Local Financial Advisor
We are in your community. We are local.
Investment Management
We tailor to each client. Index funds at the core.
Index Funds
Broad market exposure, low expense.
Dan's Corner
Meaningful musings from our founder.
Fiduciary
Your best interests are our priority.
Low Fees
Our fees are among the lowest in the nation.
Financial Planner
Financial advisor optimizes your financial picture.
U.S. Treasury Bonds
Use Treasury Bonds to reduce risk.
Book Recommendations
Here are some of our favorites.
Inflation
What is inflation, and what causes inflation.
When Should I Invest?
Life transitions = important financial decisions.
Retirement: 401k and More
Retiring? Plan the future you want.
IRA Rollovers
401k Rollovers. IRA Rollovers
Active vs. Passive Investing
We believe there is a winner in this debate.
The Investment Process
How we work: low-cost index funds, personalized attention.
Simplicity
Simplicity is the ultimate sophistication.
Investing: What to Focus On
Low-fee index funds. fee-only advisor.
Switching Financial Advisors
Can be uncomfortable, but an important step.
Advisor Recruiting
We attract top-tier talent. Not your usual firm.
Basic Investing
Let's start with Investing 101.
Understanding Your Financial Statement
Let's break it down to basics.
Taxes on Investments
What causes taxes within your investments?
Behavioral Economics
The less emotion, the better.
Timing the Market in 2020
2020 - a case study in the futility of market timing.
How Financial Firms Bill
Fee-based vs. fee-only, and lots more.
Who Supports Indexing?
Bogle, Swensen, Buffett, and others.
Transparency
One click to see our fees.
Mutual Funds vs ETFs
Clarifying the difference.
Does Stock Picking Work?
The research says no.
Countering Arguments Against Index Funds
What happens in a down market?
Annuities
Lots of fees, little clarity.
How Do Mutual Funds Work?
Invest in the basket.
How to Relieve Financial Stress
New client? anxiety is normal.
Financial Terms Glossary
Common investment terms you should know.
Firm Comparison
One Day In July vs the competition.
Retirement Investing
Retiring? Let us help.
Accounts We Manage
We manage a wide range of investment account types.
Pay Yourself First
Saving and Investing for the future.
Investing an Inheritance
Prioritizing and planning for the future.
Frequently Asked Questions
Good questions, real answers.
Women and Investing
Your voice needs to be heard. We are listening.
For the Business Owner
Choosing what's best for your business.
Environmental Investing
Carbon intensity, fossil fuels.

Locations

Vermont

Connecticut

United States

Services

Individuals

401k Plans

Institutions

Environmental

Account Types

Differentiators

Cash Flows

Low Fees

Fiduciary

Dedicated Advisor

Materials

Advisors: Join Us

Careers

Articles on Investing

About the Secure Act

Quarterly Booklets

Resources

Vermont Investment Management

Vermont Retirement Planning

Vermont Wealth Management

Vermont Financial Advisors

Investment Tools

In the Media

Shelburne, VT Financial Advisor

Frank Koster | Josh Kruk | Keith McCarthy

5247 Shelburne Rd, Suite #101

Shelburne, VT 05482

(802) 777-9768

Stowe, VT Finanical Advisor

Available for meetings in Stowe.

Peter Egolf

(802) 999-2321

Burlington, VT Financial Advisor

Hans Smith | Katie Muttitt

Nancy Westbrook | Peter Egolf

77 College Street #3A

Burlington, VT 05401

(802) 503-8280

Darien, CT Financial Advisor

Available for meetings in Darien.

Keith McCarthy

(203) 554-9466


v 2.1.26 | © One Day In July LLC. All Rights Reserved.