Investing

Investing in a stock, bond, ETF, or mutual fund

What to consider

1. Cost

Cost matters when you’re investing. The less money you spend, the more you keep. The cost of an investment depends primarily on its expense ratio and commission. 


Expense ratio

An expense ratio is the percentage of a fund’s total assets that goes toward the cost of running the fund each year. For example, if you invest $1,000 in an ETF or a mutual fund with a 0.10% expense ratio, you’ll pay $1 a year in fees. If you invest the same amount in a fund with an expense ratio of 0.60%, you’ll pay $6 a year.

Commission

A commission is a fee you pay to a broker each time you buy or sell 1 or more shares of an individual stock, bond, or ETF. For example, if you buy shares of 20 individual stocks, you’ll be subject to 20 commission charges. If each commission is $5, that’s $100 (regardless of the total amount you invest).

Similar to an expense ratio, when you pay less in commissions, you have more money available to compound.

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