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Avoid high fees from "summary" of The Only Investment Guide You'll Ever Need, Revised Edition by Andrew Tobias
One thing to avoid is high fees. If an investment has a 5 percent front-end load, for instance, you start off 5 percent in the hole. Plus, you're paying for the privilege of investing in a fund that's very likely to do no better than average. So you're actually worse than average. If you invest $10,000 in a fund with a 5 percent front-end load, you immediately lose $500. If you invest that $9,500 in a fund that goes on to earn 10 percent a year, you'd have $17,220 after ten years. If you invest the full $10,000 in a no-load fund that also earns 10 percent a year, you'd have $17,620. That's $400 more. If you were to invest the money in a fund with a 2 percent annual expense ratio, you'd lose another 20 percent of your return, or $400 a year on that $10,000 investment. After 10 years, you'd have $14,802, compared to $17,620 in a similar no-load fund. Over 20 years, you'd have $35,000 less. And that's just in fees - you're not even factoring in the initial front-end load. Of course, if the fund does better than average, all else being equal, you'd still wind up with more money in your pocket if you paid lower fees. So, the point is to pay as little as possible in fees. This means avoiding front-end loads - that's a given. It also means choosing no-load funds over load funds, and funds with lower expense ratios over those with higher ratios. A difference of 1 or 2 percent a year may not sound like much, but over the years, it can really add up. When it comes to investing, every dollar counts. And the less you pay in fees, the more you get to keep for yourself.
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