A while ago I decided to start investing on my own after I came to the realization of what the true cost of owning shares in a managed mutual fund really was.  I decided to share this revelation with my readers so that they too could see what they are really paying to have their investments managed for them.

Year Profit Made Account Balance Managment Fees Extracted Amount Remaining Without Management Fees
1 8000 108000 1080 106920 108,000.00
2 8,553.60 115,473.60 1,154.74 114,318.86 116,640.00
3 9,145.51 123,464.37 1,234.64 122,229.73 125,971.20
4 9,778.38 132,008.11 1,320.08 130,688.03 136,048.90
5 10,455.04 141,143.07 1,411.43 139,731.64 146,932.81
6 11,178.53 150,910.17 1,509.10 149,401.07 158,687.43
7 11,952.09 161,353.15 1,613.53 159,739.62 171,382.43
8 12,779.17 172,518.79 1,725.19 170,793.60 185,093.02
9 13,663.49 184,457.09 1,844.57 182,612.52 199,900.46
10 14,609.00 197,221.52 1,972.22 195,249.31 215,892.50
11 15,619.94 210,869.25 2,108.69 208,760.56 233,163.90
12 16,700.84 225,461.40 2,254.61 223,206.79 251,817.01
13 17,856.54 241,063.33 2,410.63 238,652.70 271,962.37
14 19,092.22 257,744.92 2,577.45 255,167.47 293,719.36
15 20,413.40 275,580.86 2,755.81 272,825.05 317,216.91
16 21,826.00 294,651.06 2,946.51 291,704.55 342,594.26
17 23,336.36 315,040.91 3,150.41 311,890.50 370,001.81
18 24,951.24 336,841.74 3,368.42 333,473.33 399,601.95
19 26,677.87 360,151.19 3,601.51 356,549.68 431,570.11
20 28,523.97 385,073.65 3,850.74 381,222.92 466,095.71
21 30,497.83 411,720.75 4,117.21 407,603.54 503,383.37
22 32,608.28 440,211.83 4,402.12 435,809.71 543,654.04
23 34,864.78 470,674.49 4,706.74 465,967.74 587,146.36
24 37,277.42 503,245.16 5,032.45 498,212.71 634,118.07
25 39,857.02 538,069.73 5,380.70 532,689.03 684,847.52
26 42,615.12 575,304.15 5,753.04 569,551.11 739,635.32
27 45,564.09 615,115.20 6,151.15 608,964.05 798,806.15
28 48,717.12 657,681.17 6,576.81 651,104.36 862,710.64
29 52,088.35 703,192.71 7,031.93 696,160.78 931,727.49
30 55,692.86 751,853.64 7,518.54 744,335.11 1,006,265.69

If you were to put 100,000 dollars in a managed mutual fund and let it accrue for 30 years at an historical growth rate of 8% after 30 years your investment would now be worth 744,335.11 dollars.  over the 30 years of investing you would have paid 100,560 dollars in management fees.  but that is not the true cost of ownership.  if you had kept the management fees and added them back into the original balance and instead invested in a low cost index that grows at the same 8% rate your investment would have been worth 1,006,265.69.  that is a lost profit of around 262,000 dollars.  Now ask yourself like I did do mutual fund really provide that much of a performance difference to warrant losing 262,000 dollars over a 30 year time frame?  You must decide...

 

 

 

More blogs coming soon!