Investor Fees

There is a considerable amount of profit that can be generated from the right kind of investment, but merely being successful in the market is not enough to guarantee a good return.

One of the most important factors to consider is the cost of fees and failure to include this in any calculations can turn a winning investment into one that generates a loss.

Not every investment generates the same kind of fees and those wanting to hold a diverse portfolio must ensure they understand the various different structures that apply.

Fees are not always obvious and can be disguised in a variety of ways, such as being factored into the bid-ask spread, a method that is used in foreign currency trading. Fixed sum fees plus a percentage of either the profits or the initial investment are another common way of charging, as well as pure commission.

Some types of investment carry far higher fees than others. Typically, those further away from the mainstream and with lower volumes will be more expensive than the kinds of investments that will appeal to the masses. For example, a Brazilian corporate bond will cost far more in fees than purchasing a US Treasury Bond.

At the opposite end of the spectrum, ETFs are one of the cheapest forms of investment, charging very little in the way of fees and thus making them an attractive option for many. Mutual funds overall tend to offer good value, but a select few carry front end charges of as much as 5.5%. This kind of fee structure means that in order to return a decent profit, the investment must significantly outperform the market, an almost impossible task.

Whilst fees without doubt impact on potential gains, it is important to ensure that this is not the only factor taken into account when choosing an investment vehicle. It is important to decide on the right kind of asset, balancing risk with profit rather than opting to proceed because a particular option has a cheap fee structure. Once you have decided the basics of what you want to invest in, you should then scour the market for the most profitable deal on offer.

It is possible to find some brokers in the market who are willing to waive fees if you are depositing above a certain amount. Again, whilst this should not influence you to invest more money than you can afford to, it is worth considering, because the financial advantages to zero charges will have a significant impact on your return. However, other brokers also charge their clients fees for a lack of activity, meaning you will be stung with a bill before you even start. Needless to say, these kind of contracts are best avoided unless you can be absolutely certain that you will be remaining active.

When it comes to investing money saving money to start with should be the primary consideration. By ensuring you take care at the outset not to sign up to a deal that is going to be expensive, the chance of making a healthy profit on any investment increases substantially.

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