It’s Only a Couple of Percent

When it comes to investing, you can’t beat the market, but you can come very close to matching it.  I encourage you to consider the effects of high fees on your returns and compound those losses to your bottom line over the period from today until you retire.  Most managed mutual funds will have fees (do not forget the hidden ones!) of around 2.0%.  If the market is providing a return of 8% annually, and you are losing 3% to inflation and another 2% to mutual fund fees, you only realize a 3% gain (in real dollars).  Applying the rule of 72, we can determine that an index fund with a 0.5% fee will double every 16 years.  If you are in a fund with a 2.00% fee structure, it will take 24 years to double.

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