COST
Markets are unpredictable but costs are something that one can control. Investors should strive to minimize costs wherever possible because they eat into the actual return on investments. Many mutual funds fail to outperform basic index funds simply due to the fees they charge, some of which are upfront and many of which are hidden. Why pay more for lower returns? Most investors are better off owning stocks directly, once they are able to hold even five different positions. The marginal benefits of diversification beyond 13 holdings is little to nothing. Since 90% of a portfolios gains are based on asset allocation and diversification, it makes no sense to pay for mutual fund management fees.
Clients wishing to employ funds in their portfolios, which do have their place, should stick to indexed investments and ETFs. Sticking to the disciplines of an established investment plan will also help control costs, since it prevents investors from unnecessary commissions and other trading fees generated by impulsive and excessive trading. Take an active role in minimizing costs. Every dollar you spend is a dollar less than your potential return. Always remember that paying more doesn’t always get you more.