The Fees to Watch Out for When You Start Investing

So you’re ready to start investing to build your nest egg. That’s great, but there are a few important things to consider when you start investing, and fees are commonly overlooked. Some of them are unavoidable, but it helps to know what you’re getting into.

Whether you’re signing up for a 401(k) or picking your own mutual funds for an IRA, you can expect to pay fees whenever you deal with investments. GOBankingRates lists a few common fees you might be able to avoid or at least reduce. For example:

• IRA Fees: If your IRA is invested through a brokerage account, you could be paying something called an IRA Fee or a Brokerage Fee, mutual fund counselor Timothy M. Scholten told the site. Essentially, you’re paying a third party to hold and manage your mutual fund investments. He advises buying your mutual funds directly.
  
• Expense Ratios: This is basically a convenience fee for mutual funds, Exchange-traded funds (ETFs), and closed-end funds. Mutual funds are strategically made up of a variety of individual investments, and the fund company charges you a fee for that convenience. To avoid this fee, GBR suggests opting for index mutual funds or ETFs, which typically have lower expense ratios.
  
• Trading Costs: These are fees charged by brokerage firms to buy or sell an investment. They’re also called commissions. If you have a Scottrade account, for instance, and you want to buy shares of an individual stock, that transaction will cost you $7. If you’re into active trading, it’s tough to avoid these fees, but GBR suggests trading less frequently, doing business with a low-cost firm like Fidelity or E*Trade, and looking for a firm that offers no transaction fees on some exchange-traded funds.
  

We’ve told you about FeeX, a tool that shows you just how much the fees in your investment accounts are costing you. It’s worth looking into for a quick assessment. And to learn more about each type of fee, head to the link below.

5 Investing Fees Beginners Forget About | GOBankingRates

Photo by Chase Elliott Clark.

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