Yesterday, we responded to a member’s comment, which stated as follows: “If everything is as easy as you suggest, there would be a great many wealthy people around.”
We said that that the small percentage of wealthy people around is partly due to the enormous conflict of interest which exists between Wall Street and Main Street. We pointed out that nearly all Wall Street banks are fined every year for market manipulation, insider trading, misleading information about securities, the omission of important information about securities, stealing customers’ funds or securities and other crimes many of which go undetected. And where do the Wall Street banks get the millions to pay these fines? Look in the mirror.
For details about the fines imposed on your bank, do a combined internet search for the name of your bank and “SEC actions”. You might be surprised.
Today, we will add yet another reason, namely fees — legal fees, trustee fees, transactional fees, stewardship fees, bookkeeping fees, finders’ fees and who knows what other fees, many of which are deeply buried.
Wall Street is quick to point out these fees often add up to a mere 1% of the funds we invest. It seems pretty modest but let us examine the actual impact over a 30-year investment timeframe.
Let us look at investing 10,000 annually for 30 years at a return on investment of 7%. That is a realistic rate of return. Then, let us compare that to investing 10,000 annually for 30 years at a return on investment of 6% arising from that modest 1% in fees.
The first example works out to $1,086,852.96. The second example works out to $895,451.69.
The difference, hello, the difference? $191,401.27!! That is decidedly not modest.
Graham is Warren Buffett’s mentor.
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