In the world of investing, there are countless strategies and approaches that individuals can take to try to maximize their returns. From day trading to options trading to value investing, the options seem endless. However, one often overlooked strategy that can have a significant impact on your returns is simply reducing fees.
The investment purist understands that every dollar spent on fees is a dollar that could have been invested and potentially grown over time. By simplifying your investment strategy and reducing the fees you pay, you can enhance your returns without taking on any additional risk.
One of the easiest ways to reduce fees is to opt for low cost index funds or exchange traded funds (ETFs) instead of actively managed mutual funds. These passive investment options typically have much lower fees than their actively managed counterparts, allowing you to keep more of your returns.
Additionally, consider consolidating your investment accounts to reduce administrative fees. By having all of your investments in one or two accounts, you can save on account maintenance fees and potentially qualify for lower fees based on the total assets you have invested.
Another way to reduce fees is to avoid unnecessary trading. Constantly buying and selling stocks or funds can rack up fees quickly, eating away at your returns. Instead, focus on a long term buy and hold strategy that minimizes trading and associated fees.
Finally, consider working with a fee only financial advisor who is a fiduciary. These advisors are legally obligated to act in your best interests and typically charge a flat fee rather than a percentage of your assets under management. By working with a fee only advisor, you can ensure that you are getting unbiased advice without excessive fees.
In conclusion, the investment purist understands that reducing fees is a simple yet powerful way to enhance returns. By simplifying your investment strategy, opting for low cost index funds, consolidating accounts, avoiding unnecessary trading, and working with a fee only advisor, you can keep more of your hard earned money working for you. So take a closer look at your investment fees and see where you can make some changes to boost your returns.