How compounding costs can be bad for your money 😬
As fees are deducted from your investment, this means you invest less money and your investment can grow less.
Let’s have a look at the following comparison:
A. Selma | B. Standard Mutual Fund | |
Initial Investment | 50.000 | 50.000 |
Annual Management Fee | 0,68% (max) | 1,5% |
Product Costs | 0,22% | 0% |
Transaction Fee | 0% | CHF 50.00 |
Entry Fee | 0% | 0.5% |
Exit Fee | 0% | 0% |
Custodian Fee | 0% | 0,3% |
Total Costs | 0.90% | > 1.8% |
What does this means in practice?
After 15 years in 2032, once robots have taken over the world and Elon Musk has built a Hyperloop from NY to Paris, this is where you stand:
A. Selma | B. Standard Mutual Fund | |
Initial investment | 50’000 | 50’000 |
Return on investment | 5% | 5% |
Earning in 15 years | + 41’354.71 | + 29’667.17 |
After 15 years | 91’354.71 | 79’667.17 |
Because of the compounding costs the difference is staggering CHF 11’687.54. Â
It's 23.34% of your initial investment!
