Money Management

When you pay investment fees, you’ll eat into your returns. Keep reading to learn the impact of fees on your invested money. 

Investing money in a brokerage account is important for your future. You need to make your money work for you and earn a generous return so you can build wealth. But, there’s a lot more to think about when you’re investing compared to when you’re just sticking your money in a savings account.

One of the biggest things you need to consider is the investment fees that you are paying. Some fees are inevitable, but certain investments are a lot more expensive than others. And when you pay high fees, you can cost yourself a lot of financial security.

Specifically, here’s what happens when you get hit with investment fees.

This is the true cost of investment fees

When you pay fees for your investments, those fees eat into your returns. You get to bring home less money, and even if your investments perform very well, you’ll lose out on a big portion of the money that you should have had in your brokerage account.

Just how much money will you lose? A lot depends on how big the fee actually is. Say, for example, you invested $1,000 and earned an 8% average annual return over the course of a decade. If you paid a fee of 0.25%, you would lose $49 of the money you should have had and would end up with $2,159. But, if you paid a 2.00% fee, you would lose far more — a whopping $368 — and would end up with only $1,791.

And these are small numbers. When you’re investing a lot and you’re investing over a long time, the cost of investment fees can be even greater. Say, for example, that you invest $3,000 a year over 35 years and you earn a 10% average annual return. If you pay a 0.25% fee, you would end up with $767,731. But if you pay a 2.00% fee on the same investments, you would have $250,781 less and end up with just $516,950. That’s a lot of money to lose.

Here’s how you can find low-cost investments

Since paying investment fees is bad news, you’ll want to look for ways to reduce the cost of investing.

First and foremost, you should pick a discount brokerage firm that doesn’t charge a commission, monthly maintenance fee, or any other cost of doing business. There are plenty of brokers out there competing for your business and there is absolutely no reason to pick a broker that’s going to make you pay to be a customer.

Next, you’ll want to watch the fees on investments you buy. If you’re purchasing shares of individual stocks, this shouldn’t really be an issue. But if you’re buying mutual funds or ETFs, then it’s important to look at the expenses of your investment.

Ideally, you’ll want to pick a passively-managed investment, such as a fund that tracks the performance of a financial index. An actively-managed fund (where an investment professional picks investments) is usually much more expensive, because you have to pay the fund manager. And, actively-managed funds typically do worse over the long term because even professionals aren’t that great at consistently beating the market.

By carefully comparing fees and choosing the right broker and investments, you can avoid losing a good portion of your return to investing costs. This way, you’ll end up with more money in your nest egg.

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A primary residence shouldn’t be considered an investment in the traditional sense, but it still might be worth buying one. Read on to learn why. 

Investing your money simply means purchasing assets that grow in value over time and can therefore give you a profit when you sell them (or otherwise generate income for you). There are many ways to invest, some with higher returns than others. A lot of people consider buying a home to be a kind of investment, and this does make a certain amount of sense. After all, when you buy, you’re getting an asset that is likely to appreciate over time (although this isn’t guaranteed, and there are a lot of factors at play).

But there are more predictable investments out there. For example, you could open a brokerage account and buy stock shares. If you created a balanced and diversified portfolio, you might be able to snag a very nice return indeed. The S&P 500 has generated returns averaging 10% (before inflation, that is) over the last 50 years, which means that if you invest with a long time horizon, you’re likely to come out ahead.

Your primary residence will not give you this kind of return, especially since you’re likely to be buying it using a mortgage loan you must pay back (with interest!) over a period of 15 or even 30 years. Buying a home is worthwhile for a lot of people, though, despite the fact that it’s not really an investment in the traditional sense. Let’s discuss why.

You’re buying a stable place to live

First and foremost, when you buy a house, you’re getting a place to live. That alone is worth a ton of intrinsic value. You can give your family stability, and guard your budget against housing cost increases. Renting comes with a lot of benefits (and is cheaper and more flexible than owning a home), but if your landlord decides to sell, you usually have to move out. Your landlord could also increase your monthly rent to a figure you can no longer afford, again leaving you in the lurch. Buying a home is considered a big part of the American dream, and since almost two-thirds of Americans own their home, it’s clearly a priority for many of us.

You can do whatever you want with the house

I’ve rented for the vast majority of my life, and while it can be nice to pick up the phone and call the landlord if there’s a water leak or a wasp problem, the trade-off of renting is that what I can do with a property is extremely limited. As much as I’d love to rip out all the hideous wood paneling in my current rental and replace it with actual drywall, I can’t do that. But if I bought a home with wood paneling (let’s hope it doesn’t come to that in this very difficult market), I’d be free to do so.

If you buy a home in a neighborhood that’s part of a homeowners association, you may be more limited than you want in terms of how you can paint your home, style your landscaping, and so on, but it’s still likely more freedom than you’d get as a renter.

You can borrow against home equity

Buying a home gives you the chance to build up equity (the amount of money you have paid into your home) that you can borrow against later on, such as in the form of a home equity loan or a home equity line of credit (HELOC). You could even refinance your mortgage and get cash out of it in the process. This might be a good move if you need money to put back into your home in the form of renovations, especially if they could lead to you commanding a higher price for the house should you elect to sell it later.

No, buying a home shouldn’t be regarded as an investment per se, but it still might be a good idea for you, for all these reasons, and likely more.

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When a home goes up for sale, you should look at the property history to see when it last sold and what price it sold for. Here’s why. 

If you are hoping to buy a home, chances are good you are studying real estate listings carefully. You are probably focusing on the price to see if you can afford the mortgage for the home. And the photos are a big draw as well, as you imagine yourself cooking in that pretty kitchen or maybe painting the bedroom a different color after you move in.

When you’re looking at the listing, though, there’s one section you absolutely must take a close glance at. It’s the property history section — and here’s what it can tell you.

When the house was listed

The property history will tell you when the home was listed, down to the exact date. For example, a property listed on July 25, 2023 would have that date along with a note that it was “Listed for sale.”

This is a very helpful piece of information because sellers are more likely to negotiate if the house has been sitting on the market for longer. If the home has been listed for 200 days, a seller may be more willing to accept a lower offer compared with if the house was just listed yesterday.

Whether the house is listed for rent, for sale, or both

The property description will specify whether the home is listed for sale, listed for rent, or both. You’ll also want this information. If the property owners have listed it for rent, that likely means they are not currently living in it. They may be more amenable to an offer if they have moved out already — especially if they’re also trying (and failing) to find renters.

Whether the house has been listed and removed recently

When you look at the property history, you’ll now only see when the home was most recently listed, but you will also see if it has been listed and removed from the market recently. For example, the property history might say it was listed for sale on Jan. 2, 2022 and then removed a few months later on May 2, 2022.

If you see that a house has had a history of coming on the market and later being pulled off, it’s possible that the sellers may be more eager for a sale since they’ve tried and failed to find a buyer before.

On the other hand, it could also mean the sellers aren’t willing to budge on price and would rather just take the house off the market again rather than reducing the cost to find a buyer.

When the house last sold

You will also be able to see when the property actually did sell most recently. Since odds are good that you’re buying it from the most recent people who bought it, this provides very helpful information.

If the people bought it and sold it very recently, they may be house flippers hoping for a quick profit. Or they may have bought the home and then experienced something unexpected, like a divorce, that could cause them to need to sell quickly. If, on the other hand, the people have been in the house for decades, they may be sitting on a lot of home equity.

This information can help you determine what to look for. For example, if the house is a flip, you’d want to make sure upgrades were done well and with the proper permitting.

What the most recent sale price was

Finally, you’ll be able to see the most recent sale price, so you will know what the sellers of the home paid when they bought it. This can guide you in making an offer as well, as they will likely want to make a profit off the proceeds. But if they are trying to make a profit that seems unreasonable given the length of time they owned the home and what properties are selling for locally, you know how much wiggle room you have to make a lower offer based on how much they put in.

By considering all of these key pieces of information, you can make an assessment of how likely you are to have your offer accepted if you make a reduced offer, or whether you’re looking at a situation where the seller is probably not going to budge on price.

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You’ll have a lot of costs to worry about when you start your own business. Keep reading for a rundown of some bills you might not be anticipating 

If you are starting a business, you probably already know about some of the expenses that are going to have to come out of your bank account. For example, you may need to pay for a location for your company unless you’ll be working out of your home. And you might need to buy inventory if you’re selling products, or get equipment to perform services.

But, there could be some other costs that might not come to mind immediately that you’ll also have to pay. And it’s important to plan for them so you don’t end up short of money and having to reach for your credit card to cover them.

Here are some of the common business expenses that are important to pay — but easily overlooked.

Insurance costs

You are most likely going to need to purchase some additional insurance for your business once you get the company started. The specifics are going to vary depending on the type of company you’re running, but you may need:

Property insurance if your business is renting or buying a space.Liability insurance to protect against claims if someone gets hurt due to your business operationsBusiness interruption insurance to protect you in case of a temporary loss of business income due to a covered event

If you previously had health insurance through an employer, you may need to take on the cost of this coverage yourself now that you are your own boss. And, if you are going to hire employees, you’ll need workers’ compensation insurance as well.

The cost of these policies can add up, and you need to be prepared to pay for them to get the right protections in place.

Payroll taxes

If you are hiring workers to help run your business, you won’t just have to pay for their salary and any company benefits you are providing.

You also have to pay a portion of their Social Security and Medicare taxes. Specifically, employers pay 6.2% of each employees’ wages for Social Security and 1.45% for Medicare. Employees also have the same amount withheld from their paychecks, which employers are responsible for facilitating.

Before you move forward with hiring, you need to take this crucial expense into account as you could face a lot of trouble with the IRS if you don’t properly pay your portion of these taxes.

And if you aren’t hiring employees but are earning income yourself, keep in mind you must pay both your personal and employer’s portion of these taxes on income from your company that you declare on your personal tax returns.

A payroll service

It can be pretty complicated to keep track of all of your tax withholding obligations as an employer. You’ll likely need a payroll service to help you pay your staff members or even to pay yourself if you’re running your business as a corporation and taking a salary.

Payroll services will take care of withholding the appropriate funds for the IRS and sending pay to your staff members. But, this comes at a cost.

An accountant

Finally, your taxes may become a lot more complicated once you own a company of your own. You may need to hire an accountant to help you file business tax returns or even personal returns depending on how your company is structured, how you pay yourself, and how much you make.

It’s important to take all of these expenses into account as they can add up to thousands of dollars each year, so you’ll want to make sure your business is earning enough to cover them.

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It’s good to diversify your investment portfolio. But read on to see what happens when you go overboard. 

Investing in stocks is a great way to grow wealth over time. Over the past 50 years, the stock market, as measured by the S&P 500, has rewarded long-term investors with an average annual 10% return (before inflation). So if you load your brokerage account with an S&P 500 index fund or similar investments, there’s a chance that you, too, could snag a similar return over time.

Now, you’ll often hear that it’s really important to diversify your portfolio rather than invest in just a handful of stocks, or stocks within the same specific industry. But taking the concept of diversification to an extreme by holding hundreds of stocks isn’t a good idea.

It’s all about moderation

The logic behind diversification is simple. You want a nice array of stocks in your portfolio so that if a few companies you own falter, you have other investments that can pick up the slack.

Similarly, it may be that a particular segment of the market experiences its share of turbulence, such as the tech sector, which took a big hit in 2022. If you make a point to load your portfolio with stocks across a range of market sectors, you’ll have more protection when one sector takes a beating.

But while it’s definitely a good idea to own a few dozen stocks, you don’t want to load up on too many. Stocks aren’t an investment to set and forget. It’s important to keep tabs on the companies you’re invested in. And that’s a hard thing to do 80 or 100 times over.

If you buy too many stocks, you might have a difficult time keeping up with all of them. That could put you at risk of hanging onto stocks you should really be considering dumping due to issues with the companies behind them.

What’s the ideal number of stocks to aim for?

There’s no single number of stocks that’s optimal across the board, and a lot will depend on how much research you’re willing to do. Remember, it’s important to vet a stock before adding it to your portfolio. So if you’re looking to build a collection of 45 stocks, you’ll have to do research 45 times over.

For some context, the Motley Fool recommends owning at least 25 different stocks and says the average diversified portfolio contains between 20 and 30 stocks. You may decide that you’d like to own 36 different stocks, and that’s not unreasonable. But a portfolio of 75 different stocks may prove to be unmanageable for you.

Of course, there’s another option to look at when it comes to building a diversified portfolio, and it’s to add ETFs, or exchange-traded funds, into the mix. When you buy shares of an ETF, what you’re doing is adding a bunch of different stocks to your portfolio with a single investment, thereby saving yourself some legwork.

You might, for example, buy into an energy ETF, and that could spare you from having to research dozens of energy companies individually to determine which stocks to buy. Adding ETFs to your portfolio is a good bet if you’re not quite certain your holdings are diversified enough, but you already own a few dozen stocks and want to limit the number you put into your portfolio.

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Image source: Getty Images
Costco is a great warehouse club. You can get amazing deals that help keep more money in your bank account while allowing you to bring home products that have a passionate following. You can also enjoy free samples of tasty treats in the store, or dine on a $1.50 hot-dog-and-soda combo at the food court.But, while there are benefits to a Costco visit, there are certain situations where you absolutely are better off steering clear of the club. Here are three signs you should avoid shopping at Costco at all costs.1. You’re buying wants instead of needsIf you regularly end up with items in your Costco cart that you want but don’t really need, you should probably steer clear of the store.It’s tempting to give into impulse buying — especially when the products you are purchasing seem like a good deal because you’re getting them at a warehouse club. But, even if an item is on sale or priced great, it is not a deal if you don’t really need it. It’s a waste of money.There’s no reason to put yourself in the path of temptation if you find it hard to resist. Especially since the whole point of shopping at Costco is to save you money by scoring bargains with your membership, not to leave you with a huge credit card bill because you just can’t say no to its tasty treats or unique household items.You can avoid a Costco visit by shopping online for the things you really need, using grocery pickup, or simply shopping somewhere else where you aren’t as likely to find tempting products you don’t need.2. You aren’t using up all of the items you’re purchasingCostco provides customers with the chance to save by selling bulk items. But, if you buy something that is too large a portion for you to actually use, you end up wasting a ton of money by throwing a good amount of the product in the trash.If you can’t use an 18-pack of Ritz crackers before they get stale or a 10-pound case of Mahi Mahi before it goes bad, then avoid shopping at Costco and stick to a store with more manageable proportions.3. You’re going into credit card debt to shop thereFinally, if you find yourself with a big credit card balance because of your Costco shopping, you should stop going to the store cold turkey. With the average credit card interest rate at 20.68% as of July 10, 2023, carrying a balance on your credit cards is really expensive. The added interest you pay will negate any savings you get from buying at Costco instead of other stores.Ultimately, if you cannot shop responsibly at Costco by sticking to your budget and using all of the items you buy, then a membership may do you more harm than good. If this is your situation, avoid visiting the warehouse club at all costs and stick to stores where you don’t have as much potential to derail your financial goals.Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee. In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes. Read our free reviewWe’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy. 

Costco is a great warehouse club. You can get amazing deals that help keep more money in your bank account while allowing you to bring home products that have a passionate following. You can also enjoy free samples of tasty treats in the store, or dine on a $1.50 hot-dog-and-soda combo at the food court.

But, while there are benefits to a Costco visit, there are certain situations where you absolutely are better off steering clear of the club. Here are three signs you should avoid shopping at Costco at all costs.

1. You’re buying wants instead of needs

If you regularly end up with items in your Costco cart that you want but don’t really need, you should probably steer clear of the store.

It’s tempting to give into impulse buying — especially when the products you are purchasing seem like a good deal because you’re getting them at a warehouse club. But, even if an item is on sale or priced great, it is not a deal if you don’t really need it. It’s a waste of money.

There’s no reason to put yourself in the path of temptation if you find it hard to resist. Especially since the whole point of shopping at Costco is to save you money by scoring bargains with your membership, not to leave you with a huge credit card bill because you just can’t say no to its tasty treats or unique household items.

You can avoid a Costco visit by shopping online for the things you really need, using grocery pickup, or simply shopping somewhere else where you aren’t as likely to find tempting products you don’t need.

2. You aren’t using up all of the items you’re purchasing

Costco provides customers with the chance to save by selling bulk items. But, if you buy something that is too large a portion for you to actually use, you end up wasting a ton of money by throwing a good amount of the product in the trash.

If you can’t use an 18-pack of Ritz crackers before they get stale or a 10-pound case of Mahi Mahi before it goes bad, then avoid shopping at Costco and stick to a store with more manageable proportions.

3. You’re going into credit card debt to shop there

Finally, if you find yourself with a big credit card balance because of your Costco shopping, you should stop going to the store cold turkey. With the average credit card interest rate at 20.68% as of July 10, 2023, carrying a balance on your credit cards is really expensive. The added interest you pay will negate any savings you get from buying at Costco instead of other stores.

Ultimately, if you cannot shop responsibly at Costco by sticking to your budget and using all of the items you buy, then a membership may do you more harm than good. If this is your situation, avoid visiting the warehouse club at all costs and stick to stores where you don’t have as much potential to derail your financial goals.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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