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Frugal Friday Week 31

When we talk about frugality, the easy targets come to mind, eating out, buying the $5 latte, spending on clothes, etc. All good places to look to save, but today, I’ll discuss one that’s often overlooked. Investment expenses. The annual expenses for mutual funds run from about .2% to as high as 2% depending on the fund. Think about this. A 2% per year fee adds up to take half your money over a 36 year time span. As many will have a 40 year investing horizon, this puts a sharp edge on these numbers. You toil, but the fund manager skims half your money over your lifetime? ETFs have provided a nice alternative, but with one main issue, as they are traded like a stock, there’s a commission each time you buy or sell shares. Even a $5 cost doesn’t lend itself to a plan to dollar cost average over time.

Now Schwab has announced its Schwab ETFs which it will trade for its customers at no transaction cost. The Broad Market ETF and the Large Cap ETF both Trade for .08%. This multiplies to 2.84% over that same 36 year period. Not bad. Other domestic funds they offer are a still reasonable .15%.In the end, expenses matter.

Disclaimer – This post is my opinion and observation. I happen to be a Schwab client, but I have not received any compensation for this post. I don’t think they read me.


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