Money Saving Tips to Save Thousands Per Year with Practical, Achievable Goals

The #3 Money Saving Tip in the countdown is meant to save you thousands over the long haul and it's quite simple:



Minimize your investment related expenses.

There are several opportunities to avoid or reduce the fees typical investors face and in the long run, as I'll demonstrate below, these savings can add up to tens of thousands of dollars. Here are a few of the primary ways investors experience "leakage":



Manage Your Own Money:

With some relatively basic research and discipline, a typical investor can easily manage their own funds and investments as well as a professional advisor. Granted, while there may be special considerations for multi-million dollar estates from a tax/estate planning standpoint, for an Everyday Investor starting off in their 20s or 30s, you'll likely derive little, if any, additional benefit by employing a professional financial advisor to manage your money. Here's why:

• Most advisors charge on a percentage of assets held, typically at least 1%. Over time, this adds up substantially, as you'll see below.
• Often time, advisors are under pressure to push products from their corporate directive that may not be in the best interest of investors. For instance, check out what UBS reps were recently accused of doing to their high net worth clients with respect to auction rate securities. Imagine what happens to the little guy.
• Sometimes, an advisor will sell you a load fund, which can have an upfront (or backend) fee as high as 5.75%! There is no empirical evidence that load funds perform any better than no-load funds, yet people continue to purchase them through advisors. This is because they don't know what else to do and this is the way the advisors are compensated via part of the load.
• A fee-only advisor may be the best way to go if you're seeking financial advice. They charge hourly, but at a few hundred dollars an hour, fees could add up on an annual basis there as well. If you have a high net worth, paying a few hundred dollars for decent financial advice may not be such a bad deal. NAPFA is a legitimate source of references for fee-only advisors.

Save on Fees and Beat the Actively Managed Funds by Investing in Index Funds:

It's been proven in study after study that most actively managed mutual funds underperform the benchmark index they're meant to beat over time. Couple this with higher tax liabilities due to higher turnover of investments and higher fees, you're often left paying for subpar performance and in fact, your nest egg over an extended period of time will be much diminished due to your attempts to chase index beating returns.


Example:



Let's say you're investing $10,000 once and letting it grow for 30 years for retirement.
You can invest in an index mutual fund vs. an actively managed fund.
Starting annualized return assumption is 8.5%
Expense Ratio index funds (stocks or bonds, you choose the mix): .15%
Advisor Fees- Add at least 1% + whatever expense ratios built into the vehicles: 1.50%
(This is a conservative comparison where you didn't use a load fund. It's unlikely an advisor will put you in the same low fee index fund, but perhaps you're lucky and get a low fee actively managed fund to total 1.50%)

In the index fund option, you'd have $112,000 vs. $76,000 in the advisor option!






Versus:








Trade Stocks for Free or Much Reduced Prices:

When actively trading stocks for diversification or while seeking investment objectives that you can't find in a fund (such as my high yield self-directed IRA), stock trading fees can drain a portfolio's value substantially over time as well. Rather than using a higher priced broker like Ameritrade or E*Trade, consider:

TradeKing, which is known for much lower fees, with service on par with that of the larger online brokerages:

TradeKing.com. $4.95 trades + 65 cent option contracts. Free real-time quotes. Find out why TradeKing is the King of online brokers.


Zecco.com, which incredibly, has free trading for light-medium trading. Zecco's premium services and research aren't necessarily on par with the more expensive options, but there's an online community for sharing portfolios and trades, and there's always the option to retain your existing account and utilize their tools while trading in the free Zecco account:

100% Free Stock Trade. Trade stocks for free on Zecco.com. The Free Trading Community. http://www.dpbolvw.net/lo97ox52x4KNOSTMLRKMLPQUTUU


At 1 trade per week at $10, that's over $500 per year! This adds up substantially over the years.

Money Saving Tip #10 Here. $600 Savings

Money Saving Tip #9 Here. $Hundreds Per Year

Money Saving Tip #8 Here. $700 Per Year

Money Saving Tip #7 Here. $100 Per Year

Money Saving Tip #6 Here. $1000 Per Year or more for each attempt

Money Saving Tip #5 Here. $500 Per Year easily with some simple changes

Money Saving Tip #4 Here. $Hundreds per Year in unwanted Gift Cards. Unload them!

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