As most readers know I’m pretty big on low cost investing – it’s one thing to talk about it – how about some actual suggestions on how to do it!!
- Save on taxes – Investing in a taxable account when you have tax free retirement accounts available is costing you money. Max the rrsp/401(k)/roth accounts first!
- Save on taxes part II – If you have both taxable accounts and non-taxable accounts then make sure you have the less tax efficient investments (ie bonds) in the non-taxable accounts.
- Merge accounts – If you are paying annual account fees then it doesn’t make sense to have multiple accounts with the same account type (ie RRSP). Get organized and streamline. This also applies to bank accounts.
- Buy ETFs and index funds instead of managed funds – They are much cheaper and do the job better. Do this at a discount broker.
- Lower MERs are better – If you have to buy managed mutual funds then keep an eye on the costs and returns – lower costs are better. Monitor the returns – are the high-priced funds outperforming a passive alternative?
- Pay the lowest trading fees possible – There is no benefit to paying higher costs.
- Trade as little as possible – If you can’t conclusively show that your trading increases the return then don’t do it. Each trade costs money so less is better.
- Don’t invest so much – the less investments you have, the less your costs will be – pay off debts instead. It also doesn’t hurt to live a little once in a while.
There you have it – follow some or all of those rules and you’ll be just fine! Do you have any suggestions to lower investment costs?? Can you come up with the 9th way to lower costs?
8 replies on “9 Easy Ways to Save Money On Investment Costs”
9. The opposite of number 8, invest more so you qualify for any account value levels that will result in lower charges (e.g. E*Trade drops the price of each trade by $10 once you have $50K invested, and my TD bank account doesn’t charge me any fees if I keep a minimum of $1000 in it each month).
Good list!
That’s a good one Mr. Cheap! Although it’s hard to manufacture more money out of thin air I guess if you have multiple investment accounts with different dealers then maybe consolidating them at one place would save $$!
The opposite of #1. If you expect to be in a *higher* tax bracket when you’ll be withdrawing the money, *don’t* put it into an RRSP. Wait for the TFSA in January. (This is my situation.)
Charles: Even if you’ll be in a higher tax bracket in retirement, the immediate tax savings, and the deferral of taxes over the years shouldn’t be underestimated.
The tax bracket situation is something I’ve always wondered about. Its nice to hear that its still worth it, as I probably wouldn’t have bothered except for the employer matching contributions.
On a different note, thanks for the book! I just received “Please Send Money” in the mail today. I feel like I need to apologize for the exorbitant shipping costs ($12.60!), but I will enjoy the book.
Keep up the great blogging!
David – you’re welcome for the book.
The book giveaway was quite expensive – shipping costs in Canada are too much!
Don’t forget income splitting. If you and your spouse are in different tax brackets, but investments with less efficient tax parameters (like US dividend paying companies and bonds) in the hands of the spouse in the lower tax bracket.
[…] – Now that I’m looking into investments other than our 401k and Roth IRA accounts, I have to worry about investment costs. So it’s good that Four Pillars wrote up 9 easy ways to save money on investment costs. […]