The success of an investment starts with keeping investment related costs as low as possible. To do this, be aware that your investment costs can be extremely varied. So ask as many questions as you can to clearly find out which costs apply to your specific investment – and ask these questions before investing. This will allow you to look for alternatives that offer the same performance at lower cost.
The first type of costs that you need to identify are those that arise at the moment in time when you make your investment.
If you invest on the stock market by buying shares or bonds, for example, you have to pay transaction and brokerage fees. If you invest in an investment fund, you usually pay a subscription fee, a kind of sales commission, that varies depending on the type of fund you have chosen. Direct investments in real estate are associated generally with quite considerable registration fees and notary fees. And if you conclude a life insurance contract, it is very likely that the first premiums you will pay will be used to pay the insurance agent who sold you the contract.
However, the price you pay for the asset you invest in – whether stocks, bonds, art, antiques, fine wines, classic cars or real estate – and the associated transaction costs are far from being the end of the story.
Depending on the asset in which you have invested, you will have to bear the cost of maintenance, storage or insurance. Your bank will charge you recurring commissions to keep your securities in custody in a deposit account. Even a simple savings account at your bank will generate account administration fees. An investment fund may charge you a management fee or other fees to cover the costs for safekeeping the securities held by the funds at a custodian bank. In addition, any transaction made by the fund itself will generate brokerage commissions.
Know also that the longer the maturity of your investment, the greater the impact of recurring fees and commissions will be.