1%

1-2% may not sound like much but over time, its a huge cost which lowers your investment returns.  Its ok to pay for advice but you must know what that advice is really costing you.

See the chart off to the right from the SEC.gov. This shows what the difference is between paying 1.5% and 0.5%. After 30 years (and we should all be long term investors) at average return of 8% with an initial investment of only $10,000. The difference is $22,634 in your pocket! 

Many investors utilize a stockbroker or financial advisor for advice and of course, thats not free, usually the fees range from 1-3%. So now consider that for every $10,000 you hand over to a stockbroker or financial advisor, after 30 years, you will have given them well over $20,000.

Its a lot of money, a huge cost which lowers your investment returns in a big way so you better be sure you are getting something in return, some great advice, some hand-holding during the tough times, etc. but just don't expect higher returns.
Fact is that over 90% of professional money managers cannot beat the S&P 500 with any consistency.

So just keep it in the back of your mind that while paying for advice may seem like a good idea, and sometimes it is, just remember that 1-2% is a lot of money over time and only you can decide if the advice you are getting is worth it.

If Its Too Good To Be True ...

People will ask me about investing in pink sheet stocks (.pk) or over the counter bulletin board stocks (.bb) from time to time and my answer is always the same, I have yet to see anyone make any money buying them. So run, dont walk away from anyone who is offering to sell you anything like that.

I have been around stocks for almost three decades and the story is always the same, its a small company with a great product that just needs funding. Maybe something to do with China or India. Biotech and a cancer cure always generates some buzz.  Homeland security is new.  JUNK. I know the stories sound good but so does Dr. Seuss.

If the company actually had a real product, they would go the private equity route to fund their needs but those guys are far too smart for that junk. So the peddlers of pink sheet and otcbb companies have only the regular investing public to prey on.  Stay away.

Your 401k

With stocks up more than 60 percent since hitting bottom last March 2009, the red ink is finally fading on the typical 401k account and younger investors are mostly solidly back in the black.

As long as you didn't panic and sell, you are probably pretty happy getting back to pre-crash levels. 
Now is the time to re-evaluate both how much you are contributing and what investments are inside.

The GAO (US govt accounting office) says that a long term 401k investor paying fees of 0.5% will have 20% more than another investor paying fees of 1.5%.  Unfortunately, you may not have a choice. 

What you can do is pick the lowest cost funds inside to lower your costs.  These are typically index funds and non-managed funds which as you know from reading this blog or my book will match or beat almost every managed fund anyway.
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