1 Easy Way to Increase Returns by $100,000

Investment performance is a critical element to achieving this outcome but for many years the forgotten element has been fees.

But this has started to change.

Thanks to increasing financial literacy and access to information, savvy investors have begun to acknowledge the impact of fees on their long-term returns.

Morningstar, one of Australia’s leading financial services data providers, advises that the average fee for a managed investment running for three years or longer is 1.73% per year.

Now, some argue that high fees are acceptable if it relates to excellent performance; as our special report How Fees Can Destroy Your Wealth discovered, 81% of managed funds underperformed their benchmark over a period of 10 years.

Benchmarks are a standard that the performance of a security, managed fund, or investment manager can be measured against; however, as they are theoretical, they are not subject to fees of any kind.

Morningstar offers four benchmarks for diversified, or multisector, investment portfolios with different levels of risk. Here are their average per annum performance figures over the last 20 years.

If you invested $100,000 over a period of 20 years in each of these benchmarks, that are not subject to fees, the differences to your returns are staggering compared to the average fee of 1.73%.

Investing without incurring any fees is an impossible task but it is clear from the above that finding ways to reduce them can make a life-changing difference.

Our way to help resulted in the creation of an investment platform called the Professionally Managed Account that offers access to a range of portfolios featuring an Australian first - a capped management fee of $550 per annum for investments of $100,000 or above.

Investments below $100,000 have a management fee of 0.55% per annum which is still 1.18% below the average.

If we now compare the impact of capped fees on an investment of $100,000 over 20 years, the rewards are clear.

While you may not have an investment timeframe of 20 years, these impacts can be felt over any timeframe making a review of your current fees and the alternatives well worth your time.

If you would like to speak to us about our fees, portfolios or how to invest then please feel free to contact our friendly team at invest@investsmart.com.au