Costs

This is a subject that is extremely important for investors to understand.  With compounding over time, most investors have little idea of the impact of an extra 1% per year, for example, has on their portfolio.  As you can see from the chart below, an extra 1% net increase in performance can add considerably to your balance.  This 1% can either come from better performance or decreased costs.

Per the Investment Company Institute’s 2009 Factbook, the average annual expense for  an actively managed US stock mutual fund is 1.46%.  For International funds it is 1.61%.

PDM Advisors (PDM) uses Vanguard Exchange Traded Funds (ETF) almost exclusively.  The annual costs of Vanguard ETFs range from .13% to .38% annually.  When the usual annual management fee of 1% is added to the Vanguard ETF costs, the client will usually end up paying less than if they bought the funds on their own.  Furthermore, they would still have the task of combining these funds into an intelligent, well diversified portfolio that reflects their investment goals and risk tolerance. Learn more about how ETFs work.

PDM uses Interactive Brokers as custodian for client’s accounts.  Interactive Brokers charges no fees to PDM’s clients beyond the $9.95 brokerage fee.  Clients have on-line access to their accounts so they may monitor them at their convenience.  Using Interactive Brokers as a custodian also insures that client’s assets are kept separate from the Advisor, particularly important as recent scandals have shown.

PDM, Interactive Brokers and Vanguard: a winning combination for individuals and small businesses!

 

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