FINANCIAL STRATEGIES GROUP
10
"21st Century Retiree
Investment Principles"
INVESTMENT
PRINCIPLES
By Financial Advisor, Brice Carter,
CFP®, CIMA®, ChFC ®, CAP®,
CDAA, MSFS
1. Watch Your Costs.
Investing is full of unknowns. The list of events, trends, and
outcomes that we do not know is nearly infinite compared to
the list of knowns. One known factor that we can control is
costs. Keeping costs low can significantly help investors long
term.
One of the easiest ways investors can keep costs low is to
utilize low cost index funds. Index funds typically cost much less
than active funds and are a great way for investors to access the
stock and bond market. In my opinion, index funds are the best
option for the DIY investor.
The impact of fees on a portfolio is relatively simple math.
If an investor has $100,000 invested over a 30 year period
and earns 6.5% a year, they will earn approximately $100,000
LESS then an investor earning 7% a year. In this scenario, if an
investor invested in a fund that underperformed by .5% due to
excessive fees, it would, of course, cost them dearly.
However, It is important to know that when selecting a
fund, cost should not be the only determinant. Two funds
that track the same index and have similar costs can have
different performances. This is due to "tracking error", which
indicates how good the fund is at tracking the index it aims at
replicating. Some funds are obviously much better at this than
others.
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