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GEORGE ANTONE

CONSIDERATION 4: FEES “But the fees are low,” I think to myself. That’s when my friend Talonya emails me an interview with John Bogle on PBS, founder of Vanguard, one of the world’s largest mutual fund organizations. John Bogle is one of the most respected names on Wall Street. The interview opened my eyes. In the interview, he was asked “So if I do your average, what percentage of my net growth is going to fees in a 401(k) plan?” Mr. Bogle replies: “Well, it’s awesome. Let me give you a little longer-term example. The example I use in my book is an individual who is 20 years old today starting to accumulate for retirement. That person has about 45 years to go before retirement -- 20 to 65 -- and then, if you believe the actuarial tables, another 20 years to go before death mercifully brings his or her life to a close. So that’s 65 years of investing. If you invest $1,000 at the beginning of that time and earn 8 percent, that $1,000 will grow in that 65-year period to around $140,000. Now, the financial system -- the mutual fund system in this case -- will take about two and a half percentage points out of that return, so you will have a gross return of 8 percent, a net return of 5.5 percent, and your $1,000 will grow to approximately $30,000. One hundred ten thousand dollars goes to the financial system and $30,000 to you, the investor. Think about that. That means the financial system put up zero percent of the capital and took zero percent of the risk and got almost 80 percent of the return, and you, the investor in this long time period, an investment lifetime, put up 100 percent of the capital, took 100 percent of the risk, and got only a little bit over 20 percent of the return. That is a financial system that is failing investors because of those costs of financial advice and brokerage, some hidden, some out in plain sight that investors face today. So the system has to be fixed.” “Why didn’t I know about this years ago?” I think to myself. I had no idea the fees had that much impact on my investments. So I reworked my investments to have minimal fees. I was on my way! I thought. But I was wrong. The GREATEST FORCES were still working against me… Then comes inflation…

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