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SFB038 Illusions of Investing Part 4 - The cost of Investing

| October 18, 2016
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Episode Summary

This episode is part 4 of Investing Illusions. Today’s illusion is about discovering the real cost of investing with a mutual fund. There are so many undisclosed fees and costs that customers are switching over to more transparent solutions. Paul discusses what a cash drag is and why ‘making it up in trade volume’ never, ever works out to the benefit of the customer.

What Was Covered

  • 01:35 - Paul does a brief review of the last 3 Investing Illusions episodes.
  • 02:20 - There aren’t a lot of articles on this topic.
  • 03:00 - Go ahead and Google ‘real cost of mutual funds’.
  • 04:55 - What is a cash drag?
  • 07:20 - Paul tells a joke about two uneducated brothers.
  • 09:45 - You can not make a profit from volume. In fact, it’s exactly the opposite.
  • 10:45 - How much better must an active manager be to at least recover the cost of active management?
  • 11:45 - Always find out what those ‘undisclosed costs’ are.
  • 12:30 - Feel free to reach out to Paul and his team if you have any questions.


"We’re hoping we can make it up on volume when this trading happens, but it just doesn’t work that way."

"These asset managers are hoping to make it up on volume, but it just doesn’t work."

"We need to know what we’re paying and what we’re getting for in return."

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