You Only Get What You Don’t Pay For in Investing

Costs in mutual funds act like tiny leaks in a ship’s hull: each fee takes a bit more of your potential return. Imagine a jar at your desk that you fill daily with the market’s returns—they drip into that jar through a funnel. Now picture holes punctured around its sides. Every month you patch some, but new leaks appear as fees, sales loads, and trading costs.

Most investors don’t notice these tiny holes. They see a healthy stock line rise on their screen, then shrug at a 1–2% annual fee that barely seems worth tracking. But the math is merciless: over decades, those small percentages compound into massive shortfalls. I might be wrong, but think of it like running a marathon while losing a sip of water every mile—you wouldn’t last until mile 25.

Behavioral science shows we underweight small losses, yet fees are exactly that—tiny predictable losses. Studies confirm that funds with higher expense ratios underperform low-cost peers by about their fee differential every single year.

When you subtract costs, you see your true return: gross market gains minus all fees. That is your real wealth increase, guaranteed. Remember the relentless rule: market return minus cost equals investor return.

Turn your understanding into action by grabbing your last six fund statements, tallying up every fee and sales load, then subtracting those totals from the gross returns you’ve earned. Compare this net figure to a simple S&P 500 index fund you could’ve held instead. This exercise reveals exactly how much you retain vs how much flows to others—so you can make better choices starting now. Give it a try tonight.