What Investment Fees Really Cost You Over 20 Years
On S$500,000 invested for 20 years at the same 6% gross return, the difference between paying 1% a year and 2.5% a year is about S$332,000. Same markets, same money, same time. The only thing that changed is the cost.
Fees look small because they are shown as percentages. A 2.5% charge sounds like a rounding error until you see what it does to a portfolio over two decades.
The worked example
This is an illustration, not a forecast. It assumes a single S$500,000 investment, a 6% annual return before costs, no withdrawals or further contributions, and the total annual cost taken from returns each year.
Total annual cost | Value after 20 years | Lost to costs vs 1% |
1% | S$1,326,600 | Baseline |
2% | S$1,095,600 | S$231,100 |
2.5% | S$994,900 | S$331,800 |
At 2.5% a year, costs take a quarter of what the 1% portfolio would have grown to, and even a 2% cost takes about S$231,000. The investor paying 2.5% gets the same market as the one paying 1%, but keeps about a quarter less of it.
Why the fee you see is not the fee you pay
The headline number is rarely the full cost. For most expats, several layers apply at once:
Product or fund charges. The ongoing fee of each fund or product you hold.
Platform or custody charges. What the platform charges to hold and administer your assets.
Advice charges. What you pay your planner, whether as a percentage, a fixed fee or built into a product.
Dealing and currency costs. Trading commissions, and the spread when currencies are converted.
Insurance wrapper charges. If your investments sit inside a policy, there may be an additional layer of costs.
Add these up and the true figure can be well above the number on the first page of a brochure. Ask for the total annual cost in a single figure, in writing.
What is worth paying for
Cost is not the only thing that matters. Good advice, behaviour coaching and sound planning can be worth far more than they cost, and I am not arguing for the cheapest option at any price. The question is whether each layer of cost is buying something you value, and whether you know what it is.
Five things you can do this week
List every investment, pension and policy you hold, in every country.
Find the total annual cost of each, from the product summary or annual statement.
Ask whoever advises you how they are paid, and in what amount.
Compare each cost with what you actually receive for it.
If something is unclear, treat that as information.
Want a clear picture of your costs?
In a Fee Optimisation review, we add up every layer of cost across what you hold and show what it could mean for you over 10, 20 and 30 years. Book a free introductory call to find out where you stand.
The figures are an illustration with assumed returns and are not a forecast or a guarantee of future performance. Investments can fall as well as rise.
Valerius Wealth, a brand owned by Seif Abdel-Hafez, who is an appointed representative of Synergy Financial Advisers Limited - UEN: 201217738K | FA License No. FA100050; Seif Abdel-Hafez, RNF No, ASM300847152 is an authorised representative of Synergy Financial Advisers Ltd. Telephone: +65 9014 1415. Email: enquiries@valeriuswealth.com Website: www.valeriuswealth.com
The information contained on this website is provided for general informational purposes only and does not constitute financial advice, recommendation, or solicitation to buy or sell any financial product. The views expressed are solely those of the author and do not represent the opinions of any financial institution or regulatory authority. While efforts are made to ensure accuracy, no warranty is given as to the completeness or reliability of the information provided. You should not rely solely on the content herein for making financial decisions and are strongly advised to seek independent, qualified financial advice tailored to your individual circumstances. This advertisement has not been reviewed by the Monetary Authority of Singapore.
Comments