No. of Recommendations: 2
Why is god's name would anyone want to pay 2.5% in fees? Why would anyone suggest that paying up to 2.5% in fees makes sense. If you have any desire to retire at any point in your life, you should keep your total fees (of any kind) well below 1%.


2.5% is certainly higher than I'd want to pay myself, but I think what Hohum was going for was that the 2.5% would be a one-time commission on the purchase, and ideally the participant would hold his/her position for many years. So the annualized expense would be much less. If you can buy in a big enough lot that the commission is under 1% of the total position, even better. But in the beginning, it's hard to buy in lots big enough to get commissions below 1%. This is exactly why I'd go with index funds while building that initial $10,000 or so. Below that level, my average position was about $500, so even at $9.99 per trade, I'd start off 2% in the hole*. In the OP's case, we're looking at lots of probably $200 per stock per month, with a $2-$4 commission on each purchase. That's better than most working folks can manage.

Anyway, IWSG, fees eat away at your returns. The younger you are, the more pronounced the effect can be. If you go with mutual funds, your best bet statistically is to find one with low fees, like index funds**. If you decide to invest in individual stocks, you're usually better off buying into solid companies, reinvesting dividends, and holding for many years. Frequent buying and selling just generates more commissions for your broker.

--
Raven
* Note: I'm invested at least partly in small-caps, such as those found in the Hidden Gems or Rule Breakers newsletters. My normal advice of holding only 8-10 positions doesn't really hold when one of your companies could go belly-up overnight. I've never had it happen (knock knock), but it could.
** I know, I'm getting a little redundant. And repetitive. But for those of us who aren't fond of the volatility of individual stocks, who don't have the time or desire to research companies and read quarterly reports, or who just don't trust ourselves to sell when the market gets rough, index funds are a cheap and simple way to build wealth.
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