Q. I keep hearing that I should be keeping my investment costs low, but as far as I can tell, I don’t have any investment costs… How do I know if, and what, I’m being charged?

A. You are not alone. Frequently, we meet with people who do not realize there are underlying costs to their investments. Many times, if someone is not paying a flat fee to a financial planner or investment advisor, they do not realize they are paying a fee at all. There are typically three or four costs associated with your investments:

1. Investment Fees – This fee is typically a flat fee that is charged on an ongoing basis to manage your accounts, provide financial planning, etc.
2. Expense Ratios – Expense ratios are tied to the specific funds in your portfolio. The charges are paid directly from your dividends so many times, you don’t even realize you were charged.
3. Trading Costs – These are the fees that the account custodian (i.e., the brokerage firm) may charge when you place a trade. In many cases, these have come down considerably, but it is something to be aware of, especially in an actively traded account. These fees are tied into the transaction, so it is unlikely that you will see these charges in a statement.
4. Sales Loads – Some funds have built-in sales charges called loads. These are commissions to the salesperson and are built right into the cost of the transaction, so again, it may not be something that you clearly see in a statement.

To determine what your true cost of investing is, you can start by reviewing statements and/or by asking your financial advisor. 401K statements typically show the expense ratios right on the statement, and if not, if you can access your investment options, you should be able to see that breakdown online. If you would like to research it on your own, Google the name of the funds (or their trading symbols) and look at a site like Morningstar or Yahoo! Finance for more information. If you are still at a loss, you might consider sitting down with a Certified Financial Planner TM for a more thorough analysis.