9 Totally Avoidable Investing Fees That Are Costing You Money

Investing for your future is a good start, but minimizing unnecessary investing fees can help grow your wealth faster.
Updated Jan. 22, 2024
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9 Totally Avoidable Investing Fees That Are Costing You Money

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You learn many concepts when you first start figuring out how to invest money. Most people focus on finding the best brokerage account and choosing the right investments. But part of the process many people may overlook is closely examining the fees they pay to invest.

Fees may not seem like a big deal when you first start investing. Sadly, they can eat up tens of thousands of dollars, if not more, throughout your investing lifetime. Thankfully, in addition to the many apps that are changing the way people invest, the marketplace is also changing its approach to fees. These days, it’s possible to find lower fee options much more often.

That doesn’t mean you don’t need to pay attention though. Are you paying any of these nine fees? If so, it might be a smart money move to minimize or eliminate them unless they serve a specific purpose.

Management fees

Management fees can come in a few varieties depending on how you invest. For example, mutual funds and exchange-traded funds (ETFs) charge management fees as part of the fund’s expense ratio. That’s because the portfolio of investments within the fund has to be managed and these costs are generally passed on to the investor. Expense ratios don’t apply to individual assets such as stocks or bonds because you manage these investments yourself.

You won’t see these fees as a line item deduction from your investment account. Instead, the funds sell investments within the fund to pay the fees. This lowers your returns. Expense ratios normally get displayed on the prospectus and marketing materials for the fund.

The fees also vary from fund to fund. A study by financial services firm Morningstar, Inc., found that index funds, or funds that track an index such as the S&P 500, usually charge an average .12% expense ratio. Active funds, where managers try to beat the market’s returns, charge an average .66% expense ratio.

You may have to pay asset management fees to your broker or financial advisor too. These fees typically add to any other costs you pay, such as expense ratios. Traditional human financial advisors generally charge about 1% of the assets they manage on an annual basis. Robo-advisors, companies that use technology rather than humans to manage your investments, may charge much less. For example, Betterment charges a .25% assets-under-management fee for using its digital tier services (as of Feb. 1, 2022).

You can avoid both expense ratios and asset management fees by carefully choosing where and what you invest in. Some mutual funds have expense ratios close to zero. Vanguard is known for having rock-bottom expense ratios on its fund products, and Fidelity offers four different funds with zero-expense ratios.

The bottom line: If you handle the investing process yourself, you can avoid the asset management fees. That said, a financial advisor may help you avoid making mistakes. If your mistakes add up to more than the fee the financial advisor charges, then hiring professional help may be worth the extra cost.

Trade commissions

In the past, when you bought or sold most investments, you used to have to pay trade commission fees. This included stocks, bonds, mutual funds, and ETFs. A few years ago, the investing app Robinhood broke onto the scene by offering no trade commissions. This was unheard of at the time when trade commissions were a few dollars per trade at most brokerage firms.

Today, trade commissions still exist at some brokerage firms, but most have moved to the no-trade commission model Robinhood pioneered. Even large firms, such as Chase and Fidelity, offer no-trade commission options on stocks and some other investments. Many firms still charge for broker-assisted trades, such as when you make a purchase over the phone. You can easily avoid these fees by making trades online or through an app yourself.

Several brokerages also have mutual fund trade fees for certain funds, which range from about $10 to $50 per trade. You can often avoid these fees by purchasing mutual funds within the fund family of the brokerage you use.

The bottom line: In a world where technology makes investing more available and inexpensive, avoid paying trade commissions, if possible.

12B-1 fees

12B-1 fees may sound like something from a foreign language, but they are found on some mutual funds. They’re included in the fund’s expense ratio and typically range between .25% to .75%. They get their name from the rule that allows the fees to exist. But because of the vague fee name, people don’t normally know what these fees pay for.

These fees pay for distribution expenses, or expenses that help mutual funds market and sell their funds to customers. This includes paying brokers to get their clients to invest in these funds. 12B-1 fees can also cover expenses to respond to investor inquiries about the investment.

In a world when most investments flowed through brokers or financial advisors, paying these fees helped mutual funds grow. People usually found out about investment options through these people. Today, most people learn about investments through investing apps or Google searches. In today’s technology-centered world, buying mutual funds with 12B-1 fees needlessly reduces your returns and helps other people make more money.

The bottom line: Because 12-B1 fees count toward the expense ratio, you can avoid paying high 12-B1 fees by looking for funds with low expense ratios.

Redemption fees

Some mutual funds charge you a fee to sell your shares. They call this a redemption fee. Although redemption fees may vary from fund to fund, the maximum fee is 2% of the sale amount. Most funds that charge these fees fall in the .25% to 2% range, but many mutual funds do not charge redemption fees.

The money the redemption fee generates goes to the fund itself, not a broker that helped you sell the investment. These fees exist because some assets may have higher costs when shareholders only hold the investment for a short period. They could also help discourage activity based on market timing within certain mutual funds.

The fees benefit long-term investors though. They help the mutual funds cover the costs of the shorter-term traders. Without the fees, the costs associated with shorter-term trading would reduce the fund’s returns for everybody.

The bottom line: You may qualify for a waiver of redemption fees if you hold the investment for longer than a certain period, such as 30 days, 90 days, or a year.


Load fees pay a broker a commission for buying or selling certain investments, such as mutual funds. You should do everything you can to avoid load fees. They can encourage brokers to buy and sell your investment positions more frequently just to help them earn more money. This process is called churning.

There are two types of load fees, also known as sales charges:

  • A front-end load fee is a fee you pay upfront when you buy the investment. If the front-end sales load is 5% and you’re investing $100, that means only $95 of your money will end up in the investment.
  • The back-end load fee pays the broker when you sell an investment, which reduces the amount of money you receive.

In the modern world of trading and investing, these fees are outdated, but you have to be careful because they do still exist.

The bottom line: When you’re ready to invest, seek funds that do not charge any load fees. With apps like Robinhood and no-commission trades at many large brokerage firms, it doesn’t make sense to pay these fees.

Account fees

Each brokerage firm or investing app has a list of fees for features and services. These vary from firm to firm. Some platforms may charge a fee for a service that another brokerage offers for free. In other cases, both investing services may charge the same types of fees, but one may offer a significantly cheaper fee structure.

Typical account fees can include annual account maintenance, account termination, wire transfer, inactivity, and paper statement fees. These can apply to any investment account. It just depends on what fees your brokerage firm charges.

The bottom line: Always reading the fine print and understanding all the potential fees should be essential steps in how you choose a brokerage account.

Monthly subscription fees

Although investing apps have helped reduce the overall fees people pay when they invest, some apps operate on a monthly subscription fee model. These can often range from $1 to $9 per month.

Unfortunately, these fees can take a big bite out of your portfolio when you’re getting started. If you can invest only $10 or $20 per month, the fees are a massive percentage of your assets. As your portfolio grows, the costs won’t take out as big of a bite. They still exist, though.

The bottom line: To avoid monthly subscription fees, choose a service that doesn’t charge them. If a monthly subscription is the best way to help you begin investing, use the service to get started. Once you feel more comfortable, move to a brokerage that doesn’t charge these fees.

Administrative fees

401(k) plans and other workplace retirement plans commonly charge administrative, record-keeping, or other similar fees. Plans may charge these fees monthly, quarterly, annually, or on some other regular basis. You normally can’t avoid these fees when you’re still employed and must keep your money in your employer’s 401(k) plan.

You could lobby your human resources department to choose a 401(k) option that keeps fees to a minimum. But that’s not something you really have control over.

Instead, when you leave the company, you may have the opportunity to roll over your 401(k) balance to an IRA or another 401(k) plan at your new employer. If you can find a plan that offers excellent investments and lower fees, consider making the move.

The bottom line: Make sure you roll over your money properly to avoid causing a distribution. If a distribution occurs, it could require paying penalties and taxes.

Qualified domestic relations order (QDRO) fees

When a couple gets divorced or legally separated, retirement accounts are one of the many assets that must get divided. QDROs allow retirement plans to split the couple’s investments as ordered by the courts without anyone incurring tax consequences — but there may be associated fees.

You should know about QDRO fees in the unfortunate event that you have to get divorced or legally separated. Retirement plans may charge fees to facilitate the QDRO process. Each plan can decide how much to charge.

Minimizing these fees probably won’t be a high priority for divorce lawyers, but you should encourage them to make it one. Try to negotiate a way to divide accounts so you need a minimum amount of QDROs.

The bottom line: No matter your current marital situation, it might be smart to look at the QDRO fee on your accounts. In the event of a divorce, you’d ideally use the accounts that charge the lowest fees to make any necessary splits.

Bottom line

Investing fees take away from your returns. Now that you know these hidden investing fees exist and how to avoid them, inspect your investments. Determine what costs you currently pay and whether switching to a lower fee investment could help you.

Before you sell your current investments, make sure you understand the impacts of that sale and any taxes you may have to pay. Sometimes, it may be worth the tax hit to reduce the fees you pay. However, investments that have resulted in large taxable gains may cause a hefty tax bill you can’t afford to pay. You may want to slowly move your high-fee investments in smaller chunks as you can afford to do so in these cases.


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Author Details

Lance Cothern Lance Cothern, CPA is a personal finance writer and founder of MoneyManifesto.com. Lance's work covering several personal finance topics has been published in U.S. News & World Report, Business Insider, Credit Karma, Investopedia, and several other publications.

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