To follow-up from yesterday’s post on an eye-popping savings opportunity, here’s a picture filled step-by-step guide on how to check your fund fees and estimate your potential savings in less than 15 minutes.
First, find your 401(k) or mutual fund provider login site. Register an account or sign in with your username or password.
Second, click the Investments option so you can view what you’re currently invested in.
Fourth, a window should open up showing up average annual returns and important details regarding your fund. In this case, the expense ratio is 0.71%.
Fifth, if the historical investment performance of your fund lags its benchmark (typically the S&P 500) and your investment fees are higher than 0.1%, definitely think about switching your investment allocation. Here’s a sample low-cost index fund for comparison with a fee of 0.045%.
Sixth, using this simplified fund fee comparison calculator (which you can use!), we can determine that changing from Fund 1 to Fund 2 could increase investment returns by $28k for every $10k invested partially by reducing fees by almost $10k over 38 years.
In this case, changing can potentially be a no-brainer. The index fund not only cost less to hold than the more active fund, but the investment returns outside of the ten-year annualized period were higher!
If you cannot find a good summary that shows details such as fund investment performance or fees, you will have access to the Fund’s prospectus and annual and semi-annual reports, which you can use ctrl + f to find fees and performance.
Voila! In less than 15 minutes, you potentially made a huge ROI on your investment preparing for financial independence and retirement!