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Reduce Fees

Do You Know What Your Investments Really Cost?


All investment firms charge fees for their services--yet surveys show that most investors don't know exactly how much they're paying. This knowledge gap can be costly, because fees and commissions can reduce returns over time.


With a $100,000 initial investment, a difference between 1% and 2% in fees could lead to a balance difference of $107,854 dollars over 30 years in this example. See footnote 1.


Investment costs generally fall into two categories: transaction costs and ongoing fund expense fees. It can help to know what these fees are for, so you can decide if they're worth paying.


When you trade a security--stock, bond, mutual fund, ETF, etc.--your costs might include: a commission on the trade; a sales load when you buy or sell a mutual fund; markup added, typically to a bond, when your broker is acting as principal.


Operating expenses are typically deducted from the fund's assets. A fund's expense ratio--expressed as a percentage of its average net assets--is accrued daily and can include management, administrative and marketing (12b-1) fees.


Trading commissions can range from less than $10 to more than $100 per trade. Mutual fund expense ratios can range from 0.10% to more than 2% (see footnote 2). Bond buying can seem especially complicated, since actual prices on the secondary market may vary. Some dealers may charge a markup (see footnote 3) of up to $21 per bond, while other charge only $1 (see footnote 4).


Read your statements, trade confirmations and the documents you obtained when you opened your account. If you're still not sure, ask your investment professional.


Ask what you're paying: Some fees may be negotiable. Consider lower-cost alternatives: You may be able to cut costs without sacrificing performance by choosing similar investments with lower fees. Limit trades: Stick to a long-term plan to avoid frequent trading.


If you're concerned about your portfolio's long-term performance, it's wise to get a handle on the fees you're paying today. Read more about different types of fees, and determine what your investment costs are now. Call us at 800-355-2162 to ask about ways you can reduce the fees cutting into your portfolio's growth.


1Assumes a 6% annualized rate of return. The examples are hypothetical and are not intended to represent specific investment products. Dividends and interest are assumed to have been reinvested, and the examples do not reflect the effects of taxes.
2In general, indexed or passive funds have lower costs, while actively managed funds incur higher management fees. The asset-weighted average for all mutual funds, excluding money market funds and funds of funds, was 0.64% in 2014, according to Morningstar.
3The difference between the price a broker-dealer pays for a bond and the price at which it is sold to you is known as the bond’s markup. The markup is a transaction cost. With new issues, the broker-dealer’s markup is included in the par value, so you do not pay separate transaction costs.
4According to a July 2013 Patpatia & Associates, Inc. study on fixed income marketing and pricing practices.


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Important Disclosures

Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully before investing.

Past performance is no guarantee of future results.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Supporting documentation for any claims or statistical information is available upon request.


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