Looking back, I can say that probably the biggest investing mistake of my life happened because I didn’t ask the right questions. I was young—just out of college—and considered myself pretty knowledgeable. I invested $2,000 in a mutual fund and told the broker I wouldn’t pay any upfront commissions, which seemed like quite a coup.
Unfortunately, I didn’t ask if there were any other costs. As a result, I ended up invested in a fund with a hefty management fee as well as an exit charge that didn’t expire for five years. I might have saved myself considerable expense if I’d just asked the right questions.
We all understand the power of questions. That’s why we ask a lot of them in our lives, whether we want to know about the fees involved with purchasing a home or the coverage of our health insurance. That same kind of engagement is at the heart of successful investing.
Just asking about the costs associated with your investments can be enlightening—and beneficial. For example: Imagine two investors, each with a $100,000 investment portfolio. One of them pays annual fees amounting to 1%, while the other pays 2%. After 20 years, the first investor’s portfolio would be worth over $48,000 more, all other things being equal.1
Yet too few people ask enough questions about how their wealth is managed and invested. At Schwab, we encourage your questions because we know that investing is too important to be left to chance.
After all, Chuck Schwab founded this company over 40 years ago to help answer a simple question: “Isn’t there a better way to invest?” It’s the same question we still ask ourselves every day on your behalf. We encourage you to do the same.
1Schwab Center for Financial Research. Hypothetical portfolio example assumes annualized return of 6% and annual fees of 1% vs. 2%. Not representative of any specific investment or product and takes no account of dividends, interest or taxes. Past performance is no guarantee of future results.