Over your lifetime you may lose 80% of your returns to mutual fund fees. A while back John Bogle founder of the Vanguard Group, was interview by the TV program Frontline.
Mr. Bogle was asked: "What percentage of my net growth is going to fees in a 401(k) plan?" Bogle replied, "Well it's awesome. Let me give you a little longer-term example. An individual who's 20-years old today [is] starting to accumulate for retirement.... That person has about 45 years to go before retirement -- 20 to 65 -- and then, if you believe the actuarial tables, another 20 years to go before death mercifully brings his or her life to a close. So that's 65 years of investing. If you invest $1,000 at the beginning of that time and earn 8 percent, that $1,000 will grow...to around $140,000."
Mr. Bogle continued: "Now the financial system -- the mutual-fund system in this case -- will take about 2.5 percentage points out of that return, so you'll have a net return of 5.5 percent, and your $1,000 will grow to approximately $30,000 to you the investor."
"Think about that. That means the financial system put up zero percent of the capital and took zero percent of the risk and got almost 80 percent of the return. And you, the investor in this long time period, an investment lifetime, put up 100 percent of the capital, took 100 percent of the risk, and got only a little bit over 20 percent of the return. That's a financial system that's failing investors because of those costs of financial advice and brokerage, some hidden, some out in plain sight, that investors face today. So the system has to be fixed," said Bogle.
Are you still hanging on to your mutual funds? It’s time to save 80% of your returns and learn how to invest successfully. I can show you how simple it is, to invest in quality dividend paying stocks when they are undervalued. I enjoying receiving emails from my readers, feel free to send me your questions by using my contact form located here, or leaving a comment below.
Did you enjoy reading this article? If so, I encourage you to sign up for my newsletter and have these articles delivered via e-mail once a month…and it’s free!