Higher Costs For Diversified Portfolio

If you are making an investment each month in six different securities, as might be the case if you have a Diversified Portfolio, then many of your monthly investment dollars could be wasted on fees.


Many brokerage houses charge $7.00 per trade.

If you are investing through an investment advisor, then …

    • you are probably paying a front end load of 4.5% (investment advisors are prone to advising you to buy funds with front end loads).
    • you are probably placed in high fee mutual fund with a management fee of 1.3% (investment advisors sell the securities of the organizations they work for)

Let’s say you are following the part of the plan where you invest $500 each month. Let us see how much of your $500 ends up invested in your six diversified securities.

    • Trade Execution Fees: 6x $7.00 = $42.00
    • Front End Load Fees: 4.5% x $465 = $23.00

So ONLY $435 of your $500 (87%) actually makes it into your portfolio securities. If only 87% of your investment is making it into your Diversified Portfolio, aren’t you 13% behind before you even get started? Doesn’t this utterly wipe out any advantage that being in a diversified portfolio might have had?


WAIT! There’s More (or Less)

IF you are using an investment advisor, you are probably paying the investment advisor 1.5% per year of ALL your assets (see Investment Advisor Costs A Lot). So in addition to the whopping percent taken from you each time you invest, the investment advisor is siphoning off 1.5% of your portfolio’s value each year.


Return To “Why No Diversification

Return To “Evidence Based Proof of Plan

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