Brokerage Fees Can Eat at Returns
Why has Vanguard had such success? Is it because they had a great marketing strategy? That could be part of the case. However, when Jack Bogle thought of the index fund in the early 1970s he was a laughing stock. Flash forward 40 years later and there are hundreds of index funds, and Bogle’s Vanguard manages trillions of dollars. Why do people flock to Vanguard? It could partially be the marketing, but bottom line its the low fees.
Whether one is an active or passive investor high fees can take a big dent out of your returns. The best way to beat the market for most is to pick a broker with the lowest index fees. However, if you want to actively invest, fees are even more important. The reason being that we are not talking about a few basis points, but many dollars per each buy and sell. Even if you are a buy and hold investor, fees eat away at returns.