This week, we’re busting myths about investing, so you’ll be better equipped to think rationally and make smarter decisions about how you invest your money.

Today’s myth is: Cheaper is always better.

Buzzer! Wrong!

Of course, fees do matter when it comes to your investment portfolio, but I see investors pursue low cost investing at the expense of a whole slough of other factors that should also be considered when evaluating your portfolio.

So here’s how I want you to think about fees instead. It’s a two-prong approach. 1) There is no free lunch when it comes to investing your money. So it’s important to understand what your fees are. How much are you paying in trading costs or commissions? How much are you paying per year in the underlying investment fees of the mutual funds or ETFs you invest your money in? And if you use a financial advisor, how much are you paying them?

Successful investing isn’t just about picking good investments. It’s about managing your emotions, making sure that you have the right stock and bond mix, that you’re saving enough, rebalancing your portfolio when you should, being tax efficient, and upteen other things, which is why I don’t run out of things to talk about here on the one minute retirement tip.

My point is, that while investing isn’t free and cheaper doesn’t automatically equal better, what you pay should be reasonable. That’s the key word: Reasonable.

So what is reasonable? If you’re a DIY investor, your all-in annual costs shouldn’t exceed .75% annually. If you use professional help from a financial advisor, your fees should not exceed 1.5%. In practice, I’ve found that if clients’ all-in fees were less than 1.5% per year, we didn't have issues with underperformance, plus they were able to take advantage of all of the advice and planning that comes with having a trusted advisor, all while saving themselves a lot of time and effort trying to do everything on their own.

That’s it for today. Thanks for listening! Tomorrow we’re going to put real estate head to head with stocks to see which one is better.

My name is Ashley Micciche and this is the One Minute Retirement Tip.

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