Investors have been concerned in recent weeks about increased market volatility. And they have felt a desire to find someone – anyone – who can tell them what to do now.
But there is far more to fear from the advisors and managers who pretend to be able to tell investors what to do, and to manage their money for a “small” fee, than there is to fear from market volatility.
Investment professionals’ fees are much larger than investors realize.
Typical investment advice and management costs eat up more than half of investors’ earnings.
Let’s take a simple example. Suppose you get a windfall of $100,000 – perhaps from an inheritance – and decide to invest it in the stock market for the long term where you know returns are greatest.
If you invest it yourself using the most naïve strategy – buying a mirror image of the entire stock market, which you can do with a low-cost index fund or ETF – a conservative estimate is that you will have $570,000 in 25 years (at 8 percent a year).
