There is a theory to become an expert in something you need to spend 10,000 hours on it. Whether the 10,000 is a perfect number, it is meant you need to spend time on the subject. For this reasons, there are many advisers who do spend time on their particular field, which is great. The time spent leads to gaining a livelihood and the overwhelming majority are trying to do what is right for their clients. In every field, there are incentives or the pay structure influences the decision making. In the world of investments at the retail level in particular some mutual fund companies pay higher commissions than others. A recent article in the Journal of Finance demonstrated what was expected and many consider to be normal, is in fact true. In the MER or Management Expense Ratio, there is a fee for advisers – if the number goes up, there are more sales. That does not necessarily mean it was a bad decision to put money in the fund, it just means with more than one funds to choose from, one aspect the adviser will look at is how much they will or could make from the one with the highest commission or largest fees. The client should ask why one fund is better than the other? what value added are you getting for the higher fees?

Linking to dividend producing stocks – we all know that lowering your fees is a good thing. If you have to generate an extra 2% to make up the difference in fees, a question to ask does your fund perform better or should it perform better? One of the reasons institutions put money into hedge funds is the expected higher performance even though the fees are higher. There are ways of reducing fees such as buying index funds or ETFs or with dividend shares enrolling in a DRIP or Dividend Reinvestment Plan where many companies offer a discount on buying extra shares. As individual there will be fees somewhere in the price, it is important to note it and whether the fee is worth it; sometimes the fee is worth it. If you are going to pay extra, then you should expect and receive more. Many people have some low fee funds and higher fee funds and compare, the ones consistently receiving better returns will receive the bigger share the next year, which is the one of reasons why this blog is about dividend funds.

There are more questions than answers, till the next time – to raising questions