Why Is It Important To Keep Investment Charges Low?

Whether you are looking to invest your own hard-earned cash or you are a business looking to invest shares as a way of future-proofing your business, it is really important to avoid any unwanted costs and charges. Minimising these additional overheads allows you to maximise your profit and returns, which can amount to considerable chunks in the longer term and improve your bank balance in the end. The importance of small differences that minimise charges and maximise potential cannot be sniffed at. 

Every single penny or cent that you lose out on in charges or to tertiary parties, you miss out on in your investment portfolio. Often, platforms will incur charges for fund management, advising costs, or general platform management charges, which will come directly out of the user's pocket. Whilst many feel like they owe these charges to the platform provider for the service they are running, there are ways to minimise this cost to allow you the best return possible on your investments. These investment fees are much like direct debits coming out of your current account. Whilst they can seem important, they often mount up considerably and eventually can take chunks out of your bankroll. 

Even what seems like smaller additional charges on your investment can damage your returns in the long term. If you take a $100,000 investment that is likely to return 5% annually before fees over 10 years with a 2% annual charge, the investment will return around $134,000. However, if you were to opt for the same investment with a platform offering 1.4% charges, then you would return $142,000 over the 10 years. A huge $8000 difference over the 10 years, which after 20 years of course, doubles. 

As with anything in the financial market, investments are a risk. Markets can fluctuate, economies can vary, and there is a certain level of volatility with any investment. But these factors are not something that you can personally control. However, what you can control are things like investment charges. By acting on the things which you can control, you are maximising your yield and placing yourself in the best possible position. By preserving the greatest profit you can from every investment, you can compound even small profits each year, which will add up over longer periods. 

Other ways to manage and control your investments are by seeking alternative ways to invest your money. Increasingly, technology has changed the game when it comes to the global financial market by bringing about more transparency and an eclectic mix of platforms and ways to invest, which have lower fees. ETFs (Exchange-traded funds), digital brokers, and AI robo-advisors are great ways of reducing entry costs to folks looking to invest. Equally, the rise of cryptocurrency investing has allowed another avenue for investors to explore that has much cheaper investment charges than traditional investing systems. 

Many of these digital assets on the blockchain eliminate 3rd-parties and allow people to trade freely between each other with tiny transaction costs attached. The likes of Bitcoin Hyper is a good example of these newly burgeoning cryptocurrencies because is a new layer-2 solution that leverages the name of Bitcoin and the security of the world's leading cryptocurrency with new and improved transaction speeds, low costs of transactions, and the utilization of smart contracts (source: https://bitcoinhyper.com/).

Despite crypto in of itself carrying a degree of risk and volatility, it is no less risky than a traditional investment in terms of market fluctuation, provided you choose wisely. What crypto has managed to do most effectively is change the way investors think about overall value. Opting for these low-cost and transparent options instead of traditional methods is a great way to personally choose how you invest and compound those profits over time more effectively. 

It is not enough to just rely on seeking the cheapest investment charge option for your investment. Conducting thorough research and creating a comprehensive investment plan is crucial to help you maximize returns. There are some other important considerations to include in your strategy, which will make it more cost-effective:

1. Diversify Your Portfolio - spread out your investments across sectors, industries, and asset classes to ensure you cover all bases

2. Establish A Clear Goal - Understand what it is you are ultimately aiming for and have it in your mind's eye. Establish this alongside effective risk management and time horizons. 

3. Keep On Top Of Things - Review and assess your investments regularly through periodical checks to remain up to date with them and ensure they are still competitive or suitable to your longer-term goals. 

When it comes to investing, you need to quickly learn that compounding is a two-way street. For those not alert to the fees attached to some investments, charges will continue to compound and cause the investor to lose profit exponentially. The same is true on the contrary. If the returns on the investment are profitable, they will continue to compound over the years and benefit the investor through the profits made. Ultimately, these fees matter, and it doesn’t matter how minimal they appear at the start; they can snowball into massive amounts of losses on your investment over longer periods of time. By identifying methods and prioritizing low fees and alternative investment options, you give yourself the best platform to build from and attain the best profits possible. Make wise choices and reap the rewards.