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The US News and World Report ran an interesting article earlier this month about the ”7 Money Mistakes We Make Every Day.” In this economy, so many Americans are paying for these common mistakes, which range from “overpaying on a mortgage” to “neglected credit scores.”
Number one on US News’ list, however, is “buying expensive mutual funds”:
Do you know how much you pay for the mutual funds in your retirement account? If you don’t know, you’re not alone. Mutual fund companies don’t send out monthly or quarterly bills. Instead, they quietly deduct their fees from the returns on your investments. These fees, quoted as an expense ratio (a 1 percent fee means you are paying 1 percent of your account balance in fees each year), add up to thousands of dollars over a lifetime of investing. To see just how much you are paying, use a free service such as Morningstar.com to track the actual expense of your mutual funds and ETFs. You can track your portfolio for free on Morningstar, including the total cost of your investments.
This is certainly true, but perhaps we should expand this a bit further. Investors are often bleeding money from their investments because they largely ignore fees on all their investments, but track returns.
One of the most common forms of broker misconduct is a breach of fiduciary duty, when a financial advisor recommends products that primarily serve to drive up commissions. Even in if one’s portfolio appears to be performing optimally, is generating thousands of dollars in returns every year, a broker can be churning the account with unnecessary trades by concealing fees in quarterly and monthly statements.
If one were to look at US News’ list at large, the main lesson drawn would be to diligently monitor all of your financial activity, which includes securities investing. Even if you consider yourself to be a novice investor, learn to watch over every decision your broker makes on your behalf.
If you suspect you have been wronged by your broker in the past, it is up to the investor to take action.
