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Investment - Fees and Overall Learning

Miss E

:/ Wanting to LEARN as much as possible! New to taking over managing investments and am not sure where to start. Much to learn. Excited to learn.
Sadly I just 'discovered' all the fees associated with investing is actually costing me money to invest. Over the last 4 years spent $12k to make $9k!
How do I TRACK and monitor ALL the fees associated for the real cost so this does not happen again?!
Someplace / someone who can mentor?

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Jim_Harman

Here are some of the fees you may encounter with investing accounts, and how to track them in Quicken:

Commissions and Loads - these may be charged each time you buy or sell a security. These are entered as part of the Buy and Sell transactions in Quicken. You can see individual and total commissions on the Investment Transaction report.

Account maintenance or advisory fees - These are either a fixed charge or a percentage of your portfolio value, usually charged monthly or quarterly. Sometimes securities are sold in the account to cover these fees. You should enter these in Quicken as a MiscExp transaction. Set up a special Category in Quicken for these fees so you can track them in a Spending report.

The best way to be aware of these fees is to study your statements carefully, and make sure the fees are recorded correctly in Quicken.

Please post back if you have further questions, but remember that as fellow users we cannot give investment advice.

Chris_QPW

Miss E said:

Tired of being told by 'others in the know' to trust their advisor and then that they don't reconcile any of their investment states and just look at how much money have gained or lost each month on the cover sheet of the statement.

Whether you should trust your advisor really depends on if you picked the right one in the first place!

The advisor I have chosen to go with all my life was myself. I might not be the best, but I don't charge myself 2% to 3% for my advice, so I have an advantage right there.

At any rate turning a blind eye to exactly what the costs are and what you your gains/losses are no matter how much you trust your advisor is a recipe for disaster, so you are certainly on the right track.

Miss E said:

Especially after realizing I am paying to make money, I currently don't understand why anyone would invest in the stock market at all!

And having myself as the advisor has had one advantage, after I have learned my lessons the hard way a few times. I'm not a good "advisor to pick 'wining securities' or to 'time buying'" (and by my research less that 2% of the advisors are that good), so I do none of that. I pick broad mutual funds/ETFs, with no loads, and low fees.

On here I have seen people post that their advisor is trading hundreds of securities a month. How they believe that anyone can do something like that and beat a low-cost mutual fund/ETF is beyond me, especially since the advisor starts out with a "disadvantage" of 3% fees and stats say that after certain number of securities they are basically producing the same thing what an index fund does. Heavens forbid if they are doing that in a taxable account!

Chris_QPW

You're welcome. By the way I don't see how anybody can make any money on the stock market pay ing 10% to 11%. The long time returns of the stock market are probably a little bit lower than those numbers.

NotACPA

@Miss E You're being taken for a ride. Your "advisor" is making 10-11% per year ... and you're only making 9%?

You'd be better off selling everything and putting it in a Money Market Fund. You'd only make a very small percent ... but it would be larger than the negative result you're getting now.

All comments

Jim_Harman

Miss E

Thank you Jim for your thorough and quick response!

What I am seeing is various account maintenance / advisory fees that ended up totally ~10%-11% that were being charged monthly. Yes securities were sometimes sold to cover those fees.
That high of advisory fees was averaging 2% - 3% of the gain average.

Thank you! and NO I am NOT looking for investment advice!
Just trying to learn a) how to enter everything manually into Quicken so I can then track expenses for 'real' cost/gain and b) just need to learn what I am seeing/reading on the statements, etc.
Especially after realizing I am paying to make money, I currently don't understand why anyone would invest in the stock market at all! Much to learn and just trying to figure out where and how to start. Again NOT looking for specific investment advice!
Tired of being told by 'others in the know' to trust their advisor and then that they don't reconcile any of their investment states and just look at how much money have gained or lost each month on the cover sheet of the statement.
Trying to figure out if there is a way to reconcile investment statements like reconciling a bank statement.

Thank you again Jim! Appreciate you and your time!

Chris_QPW

Miss E said:

Tired of being told by 'others in the know' to trust their advisor and then that they don't reconcile any of their investment states and just look at how much money have gained or lost each month on the cover sheet of the statement.

Miss E said:

Especially after realizing I am paying to make money, I currently don't understand why anyone would invest in the stock market at all!

Jim_Harman

Is that 10 or 11% of the account balance per year for fees? That is much higher than normal.

Are you able to download the transactions from the broker, or would you have to enter them manually?

Reconciling investment statements involves making sure the securities (stocks, mutual funds, ETFs etc are the same as on the statement, the number of shares and share price of each matches the statement, and any cash in the account also matches the statement. Even if you are entering the transactions manually, Quicken can help keep the share prices up to date.

If you are interested in learning about a "do it yourself" approach to investing, I suggest going to the Bogleheads website. This is a good place to start.
https://www.bogleheads.org/wiki/Getting_started

Miss E

Is that 10% or 11% of the account balance per year for fees? --> there is a yearly advisory fee + "...clients still owe third-party fund fees, such as mutual fund fees and ETF fees. Fees are deducted from client accounts each month." These are the fees I am finding at 10% - 11%

Yes I can download transactions from the broker; however, I prefer to manually enter them since I do as little as possible of my financials online due to cloud services being hacked every day. However, like it or not cloud services are here to stay and growing every day.

I take it with your statement 'Quicken can help keep the share prices up to date' that you are using Internet connectivity for downloading your specifics? ? ?

I currently am not interested in the 'do it yourself' approach to investing; however, I also don't want to be taken advantage of as it appears I have allowed myself to be up to this point. I want to be able to 'watch like a hawk' and ask intelligent questions and to keep others honest and on their toes. I do not mind paying for their services, I just don't like nor agree with the paying more than I am making. That doesn't make sense to me. At this point, I am wondering if I am missing something since I don't know what I don't know.

Thanks for the bogleheads.org web site. I'll definitely go reading there. I've also been reading a lot on investopedia.com

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Miss E

Thank you Chris_QPW

Chris_QPW

NotACPA

@Miss E You're being taken for a ride. Your "advisor" is making 10-11% per year ... and you're only making 9%?

You'd be better off selling everything and putting it in a Money Market Fund. You'd only make a very small percent ... but it would be larger than the negative result you're getting now.

Rocket J Squirrel

Miss E said:

after realizing I am paying to make money, I currently don't understand why anyone would invest in the stock market at all! Much to learn and just trying to figure out where and how to start. Again NOT looking for specific investment advice!

Here is some non-specific advice. Someone just starting to invest should not be paying fees to an advisor. That's simply too expensive. You will keep more of your own money by keeping it simple and investing in a small handful of mutual funds or exchange-traded funds. With just a few hours of research, you can find a suitably diverse set of high quality funds that you can buy and hold and not pay fees. Funds have expenses that are invisibly removed from your earnings, but such expense ratios should be much less than 1%. If you are currently at a full-featured brokerage, you can save money by moving your investments to a discount brokerage.

As a new investor, I'd stop paying fees and instead invest a little money in a general book on investing, which you can read and learn at your leisure. (This is what I did myself and not only did I gain knowledge, but confidence.) Good luck!

Jim_Harman

Out of curiosity, can you give an example of an investment that is charging 10 or 11% per year? Less than 1% is much more common for mutual funds or Exchange Traded Funds (ETFs), and many index funds charge more like 10 or 11 "basis points" which would be 0.1% or 0.11%. A basis point is 0.01%.

A few very expensive mutual funds charge a "front end load" of maybe 5%, but that is a one-time sales fee when you by the fund. If your advisor is moving you in and out of these funds on a regular basis, that is called "churning" your account and IMO you should find a different advisor.

Boatnmaniac

@Miss E - If I were in your shoes I would run away from whoever is your advisor/investments manager and find someone else who will steer you away from high cost, front/back-end loaded funds and will not charge you transaction fees. That person is seeking to line his/her own pockets rather than to look out for your best interests.

Google "best discount investment advisors" and you will get a list of some very good brokerages who won't be breaking your bank. Some of these companies are Fidelity, Vanguard, and Schwab among many others. I work with Fidelity and they charge anywhere from 0.35%-1.25% in management fees (depending on the amount you are investing and the type of investment services you want them to do for you) without needing to pay for any 3rd party MF or transaction fees of any kind (unless I specifically want to buy a MF which has fees attached to it). If you are comfortable managing your own investments then you will not need to pay any investment services fees.

I would take this action before spending a lot of time documenting and analyzing your current situation further. Analysis is good but it doesn't change anything and you are well advised to make change.

BTW, I think you have a misunderstanding of how Quicken works with investment companies. Your Quicken will connect with your investment company and download from there directly into Quicken on your computer. Your data is not saved in any Cloud....unless you decide to turn on the optional Quicken Mobile/Web feature. IMO, using Quicken to download data from investment companies is actually lower risk than manually logging into your online account via your browser because Quicken will encrypt everything. And, yes, when your investment company set up for download you will also get security prices updated, as well.

Miss E

@Rocket J Squirrel ... this was a small 401k that was transferred to a broker and put into a Roth IRA about 4.5 yrs ago. I had to transfer it so as to not pay taxes at the time. Now that I'm over that magic age and can withdraw without penalty that is what I decided to do after discovering the high fees. Thus no longer with that broker and wanting to learn all I can before I do anything with the money again. Small baby steps, but hopefully standing more in my own power and taking more ownership. Live and learn the hard way. I really am excited and wanting to learn all I can.
Thank you for your time and response!

Miss E

@NotACPA - as you will see from above - exactly what I did - closed the account - which I also found out they drug their feet on closing it for a week in order to drag it into February for which they charged me another entire month's fee for "owe third-party fund fees, such as mutual fund fees and ETF fees. Fees are deducted from client accounts each month + $110 to close the account! GRR!

VERY GLAD TO BE GONE and 'moving on down the road'.

Chris_QPW

Miss E said:

Over the last 4 years spent $12k to make $9k!

It just hit me what you said. The last 4 years have been exceptional in positive returns (as long as you didn't panic and sell at the wrong times).

Of course, with a drag of 11% a year...

Here are the three main US indexes, plus VTI which there just to get the comparison; it is a low-cost ETF that tracks the total US marker.

Image: https://us.v-cdn.net/6031128/uploads/editor/44/tu9jlf3zpcax.png

Miss E

@ Boatnmaniac - Thank you! Especially that I clearly had misunderstood how Quicken works with investment companies thus not saving anything in a Quicken cloud. Very good to know.
I am not fond of cloud services (many reasons why but short answer is I've worked in high tech for over three decades so see all that can and does happen that most people never know about) Much encryption and VPN services here on my side. Grin.

Yes - closed out this account after fully ... finally ... seeing the high fees and now that I can do so without tax consequences. I thought I would enter the last statements into a 'dummy' Quicken file so I can get used to how it all works as I am learning.

Thank you for your response, time, and support!

Miss E

@Jim_Harman - specifics ... all it says every statement is 'Program Fee' ... when I inquired specifically from the broker he sent me the fine print with the statement highlighted "there is a yearly advisory fee + ...clients still owe third-party fund fees, such as mutual fund fees and ETF fees. Fees are deducted from client accounts each month."

Miss E

@Chris_QPW ... my 4 year review right before I closed the account was at a 9% positive return. Still meant I was loosing money. Glad to be out but need to LEARN - LEARN - LEARN so it doesn't happen again! Better learn late than not at all.

mshiggins

@Miss E all investment transaction downloads are between the financial institution and your Quicken file with the exception of Schwab. Schwab uses a new connection method and the Schwab transaction data is stored in the Quicken cloud.

Miss E

VERY GOOD to know. Thank you! Currently I do not use Schwab so definitely a 'head's up'. 🙏🏻

Chris_QPW

The key here is to avoid Express Web Connect.

Direct Connect flow:
Quicken -> Financial institution's OFX server

Express Web Connect (which included the newer Express Web Connect +) flow:
Quicken -> Quicken server -> Intuit server (the "aggregator") -> Financial institution's website.

Web Connect, this is downloading a Web Connect/QFX file for the financial institution using your web browser and importing it into Quicken, which is also going to avoid your data one Quicken/Intuit servers.

Miss E

Thank you Chris🙏🏻 Such a great community of people with tremendous wealths of knowledge who take the time to share with others. ‼️💫😀🤓📚