Learn why you may be able to retire earlier than you think.
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Are You An Informed Shopper

Any time that I make a larger purchase I tend to go into research mode in an attempt to get the best deal that I can. When purchasing a new vehicle there are many qualities that I consider including dependability, anticipated maintenance costs, gas mileage and resale value.

Despite the fact that I put in a large amount of time for significant purchases I still have regrets. My biggest automotive purchase mistake occurred with one of our last vehicles where the resale value was significantly less that what I had been expecting. This life lesson was painful, but I definitely learned from this experience.

Being an informed shopper is a time-consuming endeavor that requires due diligence whether you are purchasing a vehicle, furniture or even investments. Unfortunately, the world of investing is so complicated that I don’t recall ever having met an investor who actually understood the expenses surrounding the different investments they purchased.

As part of our service to our clients, we monitor a variety of things like expenses. In this newsletter, I’ll describe some of the different types of expenses and costs that you may face with investments.

Costs Associated with Investments

In 2011, I wrote an article for Forbes titled “The Real Cost Of Owning A Mutual Fund.” This article defined some of the different costs that mutual fund ownership entails, including:

    • Expense ratio
    • Brokerage commissions
    • Market impact
    • Spread cost
    • Cash drag
  • Soft dollar costs
  • Tax costs for non-retirement accounts

If you are like many investors you probably have not heard of the different costs listed above. Unfortunately, these different costs are difficult and, in some cases, impossible to determine.

In addition to the costs associated with mutual fund ownership, there are other costs associated with investing. For example, many investors have brokerage accounts. When utilized correctly these accounts may be an inexpensive and efficient way to diversify their portfolio. Similar to mutual funds, however, investors who have brokerage accounts frequently do not understand the different ways brokerage firms generate revenue from their accounts, such as commissions from security transactions, securities lending revenues, 12b-1 fees, and interest earned on idle cash. Knowledgeable investors may be able to find ways to minimize these costs.

We’re Here to Help

Being an informed shopper is difficult for many goods and services, but especially with investments. Depending on your situation, the options mentioned in this article may make sense for you. Having us help you intelligently shop for investments that fit your risk profile and tax situation, while minimizing unnecessary expenses from middlemen is a big part of our job. It may also make a big difference as it applies to achieving your financial goals.

Hopefully this newsletter points out a small sample of the types of costs that we are monitoring on your behalf. I hope you have an excellent end to your spring and a wonderful beginning to your summer!

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About Us

Bernicke Wealth Management, Ltd. (Bernicke) is an independent, multi-disciplinary firm with 25 employees located outside Eau Claire, in Altoona, Wisconsin. Our financial advisers provide wealth management services for individual investors, businesses, foundations, and nonprofits, including investment planning, retirement planning, estate planning, and tax planning.

© 2022 Bernicke Wealth Management, Ltd.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a registered investment advisor. Great Valley Advisor Group and Bernicke Wealth Management are separate entities from LPL Financial. The LPL Financial registered representatives associated with this website may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.
Learn why you may be able to retire earlier than you think.
This field is for validation purposes and should be left unchanged.