The Fundamental Importance of Low Fees when Investing

[bitchstewie]

Brilliant article with some real world examples of the maths.

The fundamental importance of low fees when investing

[ILikeCake]

I don't dispute the maths but I always wince at these examples of average growth applied to vast time spans.

Most of the growth comes in the final years and completely ignores sequence of returns risk.

[xeny]

ILikeCake said:

I don't dispute the maths but I always wince at these examples of average growth applied to vast time spans.

Most of the growth comes in the final years and completely ignores sequence of returns risk.

Once you are fully invested, then as long as the return averages the 10% used in this example, it doesn't matter what order it comes in, you get the same answer at the end.

The issue with sequence returns to my mind is retirement followed by a period of poor returns, and I think you handle a portfolio differently between accumulation and deaccumulation to mitigate that.

TEA is impressively thrifty - his FT screen shot isn't logged in :-).

[thekingisdead]

ILikeCake said:

I don't dispute the maths but I always wince at these examples of average growth applied to vast time spans.

Most of the growth comes in the final years and completely ignores sequence of returns risk.

The longer you hold (40+yrs), your returns converge towards the long term average.