What you'll learn
- Identify common investing mistakes
- Explain why costs affect outcomes
Investing costs reduce what remains for the investor. Fees can include fund expense ratios, trading costs, advice fees, account charges, or spreads. Small percentages can matter over long periods.
Common mistakes to watch for
- Concentrating too much in one company, sector, or idea.
- Chasing recent performance without understanding risk.
- Ignoring fees and taxes.
- Treating speculation as a guaranteed plan.
- Reacting emotionally to normal volatility.
No return is guaranteed
Lower fees can improve the odds of keeping more of an investment's return, but fees alone do not guarantee gains or prevent losses.
Example
Two funds with similar holdings but different fees may produce different net results. The higher-cost option needs stronger performance just to keep up after costs.