Psychologie a chování
Investment Mistake of the Month: Ignoring Fees and Costs
Key takeaways
- Fees are the biggest silent enemy of returns — an extra 1% per year can reduce your final result by a fifth or more over 30 years.
- TER (Total Expense Ratio) is the key indicator — for quality UCITS ETFs it is typically 0.07–0.25% per year.
- Broker transaction fees add up — especially with DCA in small amounts they can be proportionally expensive.
- Compare total costs: fund TER + broker fees + any currency conversion fees.
- Not paying for what you do not need is one of the most powerful tools of the passive investor.
Ignoring fees and costs is one of the most widespread and at the same time most expensive investment mistakes — and it is insidious because the effect is not immediately visible, only manifesting years later as a noticeably lower balance.
How One Percentage Point a Year Devours Decades of Returns
The numbers are unforgiving. Suppose you invest CZK 500,000 for 30 years with an average annual return of 7%:
- At 0.10% TER (cheap ETF): final value roughly CZK 3.6 million.
- At 1.10% TER (active fund): final value roughly CZK 2.85 million.
- Difference: over CZK 750,000 — solely because of one extra percentage point in costs.
Over 30 years one extra percentage point can steal more than 20% of your final wealth. And that is without the fund performing any worse — simply because of the way compound interest works for you or against you. The mechanism is explained in the article the power of compound interest.
Where Fees Silently Erode Returns
TER is not the only cost. The total cost for an investor comprises:
- Fund TER — deducted continuously from the fund's value, not visible directly on your account.
- Broker transaction fees — a fixed fee per trade can sting with DCA in small amounts.
- Spread — the difference between the buy and sell price of the ETF.
- Currency conversion fees — if you buy ETFs in EUR and pay in CZK, the broker takes a margin on the exchange rate.
How to Deal with Fees
The goal is not to pay zero fees (that is impossible) but to pay only for what you get. Passive index ETFs with a low TER typically outperform active funds with high fees. Broker selection is covered in the guide how to choose a broker in the Czech Republic. Why passive investing wins over a long horizon is explained in active vs. passive investing.
FAQ
What is TER and where do I find it?
Total Expense Ratio — the total annual cost of the fund as a percentage of its value. It includes management, administration, and other costs. You can find it in the KIID (Key Investor Information Document) or on the fund page on the provider's website or at justetf.com.
How much does a broker fee hurt with DCA?
It depends on the fee amount and the sum invested. If the broker charges €1 per trade and you invest €50 per month, you are paying 2% just in transactions. At €200 per month that is 0.5%. Look for a broker with low or no fees on regular ETF purchases.
Is a cheaper ETF always better?
A lower TER is always a plus, all else being equal — but size of the fund, spread, domicile, and replication method also matter. An ETF with a 0.07% TER and a narrow spread is better than one with a 0.05% TER and a wide spread. Always compare total costs.