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Wednesday, May 23, 2007

High charges can take away 70% of the total return

Assume an average return on stocks of 8% p.a. over a period of 50 years. If the money is invested in a fund that takes away an average of 2.5% p.a. the net return is 5.5%.

$10,000 invested at 8% p.a. for 50 years will accumulate to $469,000. Invested at 5.5% p.a. it will accumulate to $145,400. The difference is $323,600.

The charges of 2.5% p.a. takes away 70% of the total return!

Lesson: invest in a low charge fund

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