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Zacks Advantage Blog

How 1% in Fees Can End Up Costing 28% in Returns

May 16th, 2019 | Posted in Investing

People are starting to realize the importance of fees when evaluating an investment. But many have not yet grasped just how big an impact fees have.

In a report titled “A Look at 401(K) Plan Fees,” the U.S. Department of Labor demonstrated how fees and expenses can impact long-term returns. It assumes an employee with 35 years until retirement and a current 401(k) account balance of $25,000.1

1% Higher Fees Reduced Returns by 28%!

35 Year Period, Annual Investment Return of 7%

Annual fees and expenses Ending balance
1.5% $163,000
0.5% $227,000
Difference $64,000

Fees: One of the Few Things Investors Can Control

Fees become even more important when you consider that what you pay in management fees is one of the few things you can control when investing. Markets are capricious, investment strategies may or may not work out, but fees are clearly stated and also have a direct impact on investment performance. So all else being equal, it can make a lot of sense to choose the lowest fee option available.

Zack Advantage Makes Low Fees a Focal Point

Zacks Advantage utilizes low-cost ETFs throughout the investment process to keep portfolio expenses low. This, in addition to using sophisticated technology to automate mundane tasks, allows us to keep management fees as low as 0.35%.2

Portfolio size: Less than $100,000 More than $100,000
Traditional advisor fee3 1.65% 1.65%
Zacks Advantage fee 0.50% 0.35%

With Zacks Advantage, you give up very little to get the low fees that can make such a difference to long-term investors.

Learn more about how Zacks Advantage combines the simplicity and low fees of a robo advisor with performance-focused active management. Download our Overview Guide today!

1 Source: “A Look at 401(k) Plan Fees,” U.S. Department of Labor 2 An ETF typically includes embedded expenses that may reduce the fund’s net asset value, and therefore directly affect the fund’s performance and indirectly affect a Client’s portfolio performance or an index benchmark comparison. 3 According to a 2015 Cerulli Gobal Analytics study which reported the average 2014 annual explicit client fee for sub-advisory separate accounts of 1.65%. Lower fees may apply for larger accounts. Higher fees may apply to smaller accounts. Separately managed account minimums apply. Inherent in any investment is the potential for loss. Standard management fees are available on request and are described in Part 2A of Form ADV.

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss

Zacks Advantage is a service offered by Zacks Investment Management, a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. All material in presented on this page is for informational purposes only and no recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Nothing herein constitutes investment, legal, accounting or tax advice. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Zacks Investment Management, Inc. is not engaged in rendering legal, tax, accounting or other professional services. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney- client relationship. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.