In our post titled “Should I save or should I invest?” we saw that people invest in order to generate a return.
When opting for one or the other investment, many investors focus on the interest rate level, the growth prospects of the companies whose shares they are interested in, the past performance of investment funds or on potential capital gains. Often, they overlook, or at least underestimate, an element that has a huge impact on the success of their investment: investment costs.
Costs are lurking everywhere. Some are transparent and clearly displayed, others are disguised or hidden, some are unique, others recurrent, some are fixed, others are variable …
Whatever the form of these costs, they all have one thing in common: the unpleasant tendency to erode the performance of your investment over time. After all, the return you get from your investment is nothing other than “performance minus costs”.
Managing the savings account or the securities account of a customer, developing a financial product, trading shares at a Stock Exchange on behalf of a client, managing an investment fund, providing investment advice … are all financial services, and those offering these services want to be paid to do it.
But it is very rare that service providers send their customers detailed invoices for their services. Instead, they charge their clients fees and commissions. The problem is that companies are often discreet, not to say silent, about the final cost of their products and services.