How to Invest Lesson 5 - Brokerage Fees, ETFs and Managed Funds

Lesson 5: Brokerage Fees, ETFs and Managed Funds

In this WealthLift Presentation, you will learn:

• How do brokerage commissions and fund
management costs affect my investment returns?

• What are ETFs and how can they minimize my
trading costs?

• How should I choose a stock brokerage?

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Transcript

1. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 In this WealthLift video lesson, you will learn: • How do brokerage commissions and fund management costs affect my investment returns? • What are ETFs and how can they minimize my trading costs? • How should I choose a stock brokerage? Lesson 5: Brokerage Fees, ETFs and Managed Funds
2. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How do brokerage commissions and fund management costs affect my investment returns? • By law, individuals must go through a FINRA registered stock broker to buy and sell stocks • There are brokerage commissions associated with trading through a broker
3. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How do brokerage commissions and fund management costs affect my investment returns? • Retail brokers usually charge around $6 to $10 per online trade, with other associated fees and commissions. • Trades over the phone or through full service brokers can top $50 to $100 per trade. • Managed funds have management fees which average around 1.3% to 1.5% of invested funds per year.
4. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How do brokerage commissions and fund management costs affect my investment returns? Zero Costs: $452,593 1% Costs: $314,094 2% Costs: $217,245 $10,000 invested over 40 years at 10% returns – After Costs
5. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How do brokerage commissions and fund management costs affect my investment returns? • Trading costs are an inescapable part of investing your money • For example, real estate agents regularly charge 6-7% brokerage on sales • Knowing how to minimize trading costs is a crucial skill
6. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: What are ETFs and how are they a good low-cost alternative to traditional managed funds? • Exchange Traded Funds (ETFs) are managed funds that are listed on stock exchanges, so they trade exactly like stocks on the stock market. • No minimum investment amounts • Highly liquid, or can be easily bought and sold • Much lower cost than traditional managed funds • ETFs can be purchased just like ordinary stocks through a stock broker
7. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How should I choose a stock brokerage? • Shopping around can yield savings and superior products from your stock brokerage • There are guidelines for choosing a stock broker
8. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How should I choose a stock brokerage? Full service brokers ü Offer help and advice over the phone or in person ü However, they also charge $50 to $100 per trade. ü Advice is, at best, an educated opinion. ü Over time, become an expensive luxury that reduce investment returns Discount online brokers ü Self directed investing, with stock research services ü Fast, easy trade executions ü Much cheaper than full service brokers ü Convenient, cost-effective solution ü Focus on low cost brokers with a clean, clear interface Rule One – Know what you don’t need
9. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How should I choose a stock brokerage? • Minimizing trading costs is very important to investing • The WealthLift Compare Brokerages page can be extremely helpful - Find a stock broker that suits your investing style and minimizes your brokerage costs. • Spend time looking through the broker's website and agreements – focus on the different costs and fees associated with trading with any stock broker Rule Two – Minimize your trading costs and maximize your investment returns
10. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How should I choose a stock brokerage? Through the WealthLift lessons, we’ve hopefully explained clearly the importance of: ü Understanding the terminology around stock investing ü Doing stock research ü Not letting brokers and other interested parties undermine your investing success through high fees and commissions. Rule Three – Try Stock Investing Cost- Free
11. Depictions of persons. product names and images modeled in this video are trademarks of their respective owners who do not endorse and are not associated or affiliated with WealthLift Inc. ©2011 WealthLift Inc. All Rights Reserved. Click to edit Master subtitle style 5/25/12 Lesson 5: How should I choose a stock brokerage? • By completing the final quiz on the WealthLift lessons, you’re therefore entitled to $200 Free Brokerage at the S.I.P.C. insured stock broker of your choice. • Everything you need to pass the quiz is contained in the lessons available in the Beginning Stock Investing section of WealthLift.com • Otherwise, go ahead and take the quiz to earn your free stock brokerage. Rule Three – Try Stock Investing Cost- Free