{"id":57555,"date":"2012-02-09T12:08:22","date_gmt":"2012-02-09T06:38:22","guid":{"rendered":"http:\/\/stockviz.biz\/index.php\/?p=57555"},"modified":"2012-02-09T12:08:22","modified_gmt":"2012-02-09T06:38:22","slug":"feesthe-silent-killer-of-investment-returns","status":"publish","type":"post","link":"https:\/\/stockviz.biz\/index.php\/2012\/02\/09\/feesthe-silent-killer-of-investment-returns\/","title":{"rendered":"Fees–the silent killer of investment returns"},"content":{"rendered":"
\"English:<\/a> <\/p>\n

Image via Wikipedia<\/a><\/p>\n<\/div>\n

My colleague Abhishek did an overview of how to look at investment returns (see here<\/a>, here<\/a> and here<\/a>). Let me round out the series with a pet peeve of mine: fees<\/em><\/strong>.<\/p>\n

Almost all packaged investments (mutual funds<\/a>, ETFs<\/a>, etc\u2026) come with a built-in fee structure. Typically, passive ETFs have a lower fee (0.80% for NIFTYBEES<\/a>, for example) and mutual funds average about 2% annually. So assume that you have a 10 year investment horizon. How do fees impact your total returns?<\/p>\n

Lets assume that the market always <\/em><\/strong>goes up by 8% annually. So in 10 years, your IRR<\/a> should be 8%, if you paid no fees<\/strong>. But it falls to 5.84% if you paid even 2%<\/strong> as an Expense Ratio<\/a>. But the problem is that the market doesn\u2019t go up every year but you will still pay that 2% to the bank.<\/p>\n

Before 2008, fund companies estimated that the fees for closed-end funds<\/a> averaged 6% of an investor’s return, the maximum by law for both types of funds, while the open-ended funds<\/a> charged 1.75% on average. <\/p>\n

The popularity of those high-fee funds back then shows that investors pay little attention to fees when they are amortized over the holding period. When it comes to assent management fees, fore-warned is fore-armed!<\/p>\n

\"\"<\/div>\n","protected":false},"excerpt":{"rendered":"

Image via Wikipedia My colleague Abhishek did an overview of how to look at investment returns (see here, here and here). Let me round out the series with a pet peeve of mine: fees. Almost all packaged investments (mutual funds, ETFs, etc\u2026) come with a built-in fee structure. Typically, passive ETFs have a lower fee … <\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[960],"class_list":["post-57555","post","type-post","status-publish","format-standard","hentry","category-your-money","tag-returns","entry"],"_links":{"self":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/57555","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/comments?post=57555"}],"version-history":[{"count":0,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/posts\/57555\/revisions"}],"wp:attachment":[{"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/media?parent=57555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/categories?post=57555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stockviz.biz\/index.php\/wp-json\/wp\/v2\/tags?post=57555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}