Ask Matt: Are investment fees a scam?

Q: Are investment fees a scam?

A: Investment fees can either be a legitimate and reasonable price to get access to the markets - or one of the biggest enemies to your wealth. It depends on kinds the fees you’re paying.

One of the most common investment fees most pay are those connected with mutual funds. The average stock mutual fund charges investors roughly 1% of assets as an annual fee. That means if you have $1,000 invested in a stock mutual fund, if you’re like most people, you’re paying $10 a year in investment fees. Mutual fund fees serve as a baseline to compare other investment fees you might pay. Investment fees can get suspect if they get larger than 1%. You need to understand exactly what you’re getting in exchange if you pay more than average. If you have access to a financial planner - who provides value to you - that service could be worth more. But if your investment professional is simply picking stocks that track or even underperform the Standard & Poor’s 500, you want to look elsewhere. In fact, if you’re investing in the S&P 500 - your fees should be much lower than 1%. Vanguard funds that track the S&P 500 charge about 0.1%.

Fees should also be clearly disclosed and easy to understand. If they’re not, be suspicious.

Paste BN markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.