In this video, I’ll explain expense ratios and how they can directly impact your investment returns. Understanding investment fees can save you a lot of headaches and money in the long run.

Don’t wait until it’s too late – tune in now to take control of your finances!

⏰ TIMESTAMPS
00:39: What is an expense ratio?
1:46: How fees reduce your investment balance over time
2:23: Vanguard’s average expense ratio vs. industry average

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#expenseratios #investmentfees #investmentreturns

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🎥 TRANSCRIPT

Investing your hard earned money only later to discover that there was a hidden fee eating away at your investment gains.That is a frustrating experience. This sneaky fee called an expense ratio quietly eats away at your investment returns over time.

You may not even realize it, but it’s there lurking in the shadows.So in today’s video, let’s talk about expense ratios so you can learn how they impact your investment returns over time.

I’m Lena armed the real people advisor and I teach real people like you and me how to avoid over paying for financial advice.

So what is an expense ratio? Well, it’s a management fee that you pay the mutual fund company for managing the mutual fund or an ETF but here’s the thing, these fees are not itemized on your statement making it challenging to know how much you’re actually paying.

But don’t worry, I’m here to break down all the things that you need to know when it comes to expense ratios for starters.

The term is very misleading when you hear expense ratios. I want you to think management fee, this fee is paid directly out of each mutual funds return So you don’t get a bill and you don’t see it on an invoice expense ratios are expressed as a percentage and they can range from as low as .03% to 1.5 or even more.

This may not seem like much, but over time, this can add up to a significant sum of money. Not only does your balance reduce by this fee each year, but you also lose out on the potential return if that money had stayed invested in your account.

Now, here is something else you didn’t know about expense ratios. Research on mutual funds shows that funds with higher expense ratios often generate lower returns than funds with lower expense ratios.
How so?

Well, remember when it comes to investing, you actually get to keep what you don’t pay for.

Don’t assume a more expensive fund is a higher quality investment as someone who wants you to avoid over paying. I highly recommend you avoid investing in mutual funds with high expense ratios as well as avoiding financial advisors who charge high fees.

So what can you do to invest wisely? Well, consider investing in a vanguard mutual fund or ETF Vanguard’s average expense ratio is just 0.9%.

It translates to $900 on a $1 million investment. Now compare that to the average expense ratio of 10.49% or $4900 on that same $1 million investment.

See the difference?

Remember, expense ratios affect your bottom line. So it’s important that you understand what you’re paying.

If you like this video and you want more content like it, please be sure to subscribe to my channel. And if you have a question related to personal finance or investing that you want me to answer in a future video in the description, I’ll link hashtag ask Lena where you can submit your question for me to address in a future video.

Thank you so much for watching. Until next time.

Lena Armuth Host at Retirement for Real Podcast

My mission is to make investing simple and affordable for real people, everyday investors like you.

You deserve access to the tools and resources you need to build a better financial future. That's why I'm committed to providing high-quality content that is accessible to all.

I work at Sensible Portfolios, a family-run, financial advisory firm that has served hundreds of clients for almost 30 years. At Sensible, we follow a few basic rules: Be nice to people, keep investing simple, and don’t charge high advisory fees.

So what are you waiting for? Join my community of sensible investors and start building the wealth you deserve!