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Six Types Of Investment Fees You Should Know About

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Six Types of Investment Fees You Should Know About

Be in the know. Investment fees are part and parcel of life. It’s akin to finding a good deal in a ticket from a budget airline that comes with a ton of strings attached to it. 

Do you want an aisle seat? There’s an extra charge for that. 

Do you need to check in your suitcase? Sorry, that’s not free. 

The blanket that you requested? Well, that also comes with a fee. 

It is so annoying, right?  

Just like those hidden airline charges that come like a bolt from the blue, don’t get blindsided with the hidden investment fees. What’s worse is, investment fees are not as crystal clear as those camouflaged airline charges. So it’s time to put your nose to the grindstone and uncover these types of investment fees. 

There are a ton of fees to watch out for and most of them are just downright confusing. If you’re part of a local Real Estate Investment Group, the members should be able to help you wade through all the confusion.  Otherwise, this is where things get a little rocky. But don’t despair, hold on tight and strap those seatbelts in. We are about to dig in.

So, here’s a quick run-down on the typical six types of investment fees.

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Table of Contents

An advanced take home commission by the company’s salesperson.

Set things straight, find the determined amount and put it in writing. Don’t settle for any obscure verbal answers. Should you have difficulty getting a specific number, ask the salesperson how much money you will get back, should you decide to get out of the deal the next day after buying an investment. If they say you won’t get everything back, then the variance is most likely the fee for the advance or upfront commissions for the salesperson. Be on the lookout for these upfront costs and commissions. They can go as high as 30% of the money invested. Try to consider also how long you could get that money back. Lastly, ask yourself if you will be willing to wait that long.

Extra fees and service charges.

Those fees on top of the auxiliary or supplementary services are hardly ever revealed or communicated. Those services can span from the smallest service to extensive and thorough, holistic planning. It should be noteworthy to know that there’s no relationship between price and the broadness of the service. That’s the sad reality. The financial service industry is elusive about this, partially because the customers don’t dig in and do their research.

Advisory fees in progress.

These fees come in many names and maybe disguised in pseudonyms. They include annual, quarterly and monthly fees for their advice and recommendations, which include rebalancing, periodic tasks, selecting the managers, setting the diversification, optimizing taxes etc. The general approximation for these fees is 1% of the assets the advisor is managing. Regardless of their advanced commission, the fees can go as high as 7%. If you are in the know, this might be spelled out in the fine print.

Miscellaneous charges.

Nothing is more dreadful than these kinds of fees. They are almost never discussed and most often difficult to unveil. Some advisors or planners charge as high as a hundred dollars per account per year. And hundreds of dollars to allow access to an account or to shut an account. Not to mention the other dollar fees to cost your funds.

Fees for Deals and Transactions.

Each time you buy or sell something, a hidden charge is normally given as payment to an overseer. The charges can range from a minuscule five dollars and can skyrocket to hundreds of dollars per deal.

Charges and fees in progress by the managers of specific funds or investments.

These charges are called the fund’s expense ratio. It is a result of the financial gain brought about by the manager and it is one of the most difficult charges and fees to look for. They do a good job at hiding these, especially in the invoices that your planners and advisors send you. You need the most transparent salesperson to clarify and disclose this to you. Most often, the amount is disclosed when there is an investment analysis coming from a third party or holding company.

To wrap things up, bear in mind to do your homework and find the entire cost of an investment. 

However, it is crucial to note that investment fees are not all bad. Those costs help make sure that your investments are satisfactorily run and supervised. They give you an assurance and the confidence that you get your money’s worth from the investments you put in. An important caveat before jumping into an investment — know and understand how it works. And you must take into consideration the investment fees. 

Be aware of what you’re paying for, be informed how much it costs — don’t leave any stone unturned. 

If you do this, you will definitely save yourself from a lot of headaches.

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