While you can’t control the markets, you can largely control the amount you pay to invest and maintain their portfolios. We believe minimising fees and costs should be a critical focus of every investor’s strategy.
Investment costs and fees can have a dramatic impact on overall portfolio returns, particularly over the longer term. Paying lower costs means more of your investment’s return can flow to you, allowing more money to be reinvested and compound into the future. Put simply, every dollar saved in trading commissions and management fees is an extra dollar available for investment and earnings potential. Over time, even small differences in fees and costs can add significant additional returns.
The graphic below illustrates just how strongly costs can affect long-term portfolio growth. Two hypothetical portfolios, each starting with the same amount and adding the same amount each year, generate the same average return rate of 6% per annum. Portfolio A assumes lower fees of 1.0% per annum while Portfolio B’s fees are 3% per annum (or the approximate costs associated with a financial adviser or managed fund offering in Australia). The difference in the projected balances between the two portfolios is significant. After 10 years, Portfolio A’s balance is more than $46,000 higher and after 20 years, the difference is over $162,000 higher – more than 1.5 times the portfolio’s original starting value!
At Six Park, our focus is on keeping costs as low as possible. All of our portfolio offerings are represented by low-cost, passive ETFs. Not only do these products charge low fees, but they tend to have lower portfolio turnover (i.e. less buying and selling of investments), which minimises the underlying transaction costs and associated taxes – especially compared with actively managed alternatives. In addition, Six Park’s fees are significantly lower than those incurred with traditional investment advice. This ensures you retain as much of your well-earned investment returns as possible.