Financial Literacy for All Americans

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Host: Nancy Anderson, CFP®, AFC
Guest: Kathy Kristof, syndicated personal finance columnist, speaker and author of three books, including the recently updated Investing 101 (Bloomberg, 2008).

In this month’s show:

Kathy explains that fees also come with a double whammy, the “lost opportunity” cost of the fees paid—because you could have invested the money instead!  Here is an example:

You have $90,000 invested and add your annual contribution of $10,000 over 20 years using a 9% rate of return with management fees of 2.2% per year.

Verdict?  You’d have over $267,000 less in the high fee account than in an index fund with the same return and fees of only 0.2% per year.

Check out the following link to calculate your “lost opportunity” cost.

Resources

• Smart Money – Fees 101
• FINRA’s mutual fund fee analyzer
• Investing 101 by Kathy Kristof (Bloomberg Press; 2^nd, updated and expanded edition)

Please send comments and ideas for future topics to us at ymm@financialfinesse.com.