How Half a Percent Can Ruin Your Retirement
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Half a percent is not a big deal, right? After all, half a percent of $100,000 is only 500 bucks. Wrong! An extra 0.50% paid in mutual fund fees can can be the difference between a comfortable retirement and living on a shoestring budget. Yesterday we looked at How to Find the Hidden Cost of Mutual Funds, and today in our series of Making the Most of Morningstar, we looked at Determining the Cost of Your Mutual Funds. Here’s why all of that is so important–The difference between paying say 0.5% and 1% in fees for your mutual funds is ENORMOUS over a 40 year (25 to 65) investment period. Here’s the math (take a guess at the difference before you read on):
| $5,436,291 | |
| $6,324,079 | |
| Difference: |
Of course, some will say that the mutual fund that costs more will return more. My response is simple–How do you know? Cheaper is not always better, to be sure. But in mutual funds, spending less can be the best investment you’ll ever make.
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6 Comments, Comment or Ping
J at Home Finance Freedom
I give this post a thumbs up. “Spending less can be the best investment you’ll ever make” applies to much more than mutual funds.
Jun 21st, 2007
Living Off Dividends
great post!
Jan 16th, 2008
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