What 1% REALLY means

1% may not sound like much but over time, its a huge cost which lowers your investment returns. Its ok to pay for advice but you must know what that advice is really costing you. 

Study this chart from the SEC.gov. This shows what the difference is between paying 1.5% and 0.5%. After 30 years (and we should all be long term investors) at average return of 8% with an initial investment of only $10,000. The difference is $22,634 in your pocket! 

Many investors utilize a stockbroker or financial advisor for advice and of course, thats not free, usually the fees range from 1-3% (which is in addition to the natural fees that exist for everyone). So now consider that for every $10,000 you hand over to a stockbroker or financial advisor, after 30 years, you will have given them well over $20,000.

Its a lot of money, a huge cost which lowers your investment returns in a big way so you better be sure you are getting something in return, some great advice, some hand-holding during the tough times, etc. but just don't expect higher returns.

Fact is that over 90% of professional money managers cannot beat the S&P 500 with any consistency or without taking on massive risk and not being diversified.

So just keep it in the back of your mind that while paying for advice may seem like a good idea, and sometimes it is, just remember that 1-2% is a lot of money over time and only you can decide if the advice you are getting is worth it.