Transparent Investing
What your broker won't tell you

A Blog dedicated to the consumer who wants to avoid unnecessarily lining the pockets of financial advisors or brokers.
 

Leaving $ in the pocket of your broker

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This entry was posted on 7/4/2007 1:16 PM and is filed under 2007.

People were shocked to learn the average cost of hiring an investment professional at 1.0% advice fee per year, adding a 1.0% active money management cost and burdening a taxable portfolio with a 1.1% extra tax penalty. All of those add up to 3.1% per year, which means that an investor will have less than half as much wealth at the end of a thirty-year period (see web site for the assumptions and data behind that calculation).

That’s a lot of money that American consumers leave on the table, or, more accurately, leave in the pockets of the investment industry, as John Bogle, the founder of Vanguard, has pointed out for years. For me the galling part of that phenomenon lies in the utter simplicity of a vastly superior solution in a diversified portfolio of index funds. Clearly this is not a new concept, as lots of well-respected experts besides Bogle have made exactly the same recommendations. Jane Bryant Quinn, the respected author and columnist on personal finance, called index funds an “adult” investment.

 
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    • 7/21/2007 8:24 PM Steve R wrote:
      Thanks Patrick for an articulate, compelling and entertaining seminar today (7/21/07) on the concepts behind transparent investing. Several people asked about buying Vanguard index funds through their brokerage accounts, and the fees that would be assessed. I checked the Schwab site tonight and found that a purchase of any mutual fund not marketed by Schwab's OneSource vehicle incurs a $49.95 fee. Thus, for a $100K investment, you are adding 0.05% to your fee burden. Double that burden for a $50K investment.

      Alternatively, Schwab offers the Schwab S&P 500 Index Fund with an annual fee of 0.36%, compared to the 0.21% for the Vanguard funds.
      Reply to this
    • 9/3/2007 2:59 PM Wally Currey wrote:
      Enjoyed what I read. From Smat Money, I have a list of 32 Vanguard ETF's. Sure would like to know where to start for a 30/70 portoflio. Equal amount in each of 32? Incidentally, my computer says that "The Full Story is corrupt"
      Reply to this
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