Can it be done?
Many people have IRA and 401k accounts. These IRA and 401k accounts mostly consist of mutual funds. Fees and expenses are taken from these mutual funds.
It is not always obvious what these fees are. Most are deducted from the value of individual shares of the mutual funds, so they don’t always show up on one’s statements.
Some of these fees include: Annual fund operating expenses,which can include management fees, 12b-1 fees, and “other” expenses. Shareholder fees can include sales loads, redemption fees, exchange fees, account feees, purchase fees, and so on.
Some shareholder fees, but not usually all, can be avoided by purchasing only no-load funds.
For a person with a 401k account from their employer, there may be a choice of which funds to invest in. However, the choice of buying individual stocks in their account may be unavailable.
Once a person leaves their employer, it is often possible to transfer the value of their account to a custodian where they could purchase mutual funds or other securities. I have never retained funds in a 401k when I left an employer. I always rolled over 401k contents to a personal IRA account.
Stocks (and bonds)
In recent years, the commissions to buy and often sell stocks has approached or reached zero. Namely, no commission.
So it seems to me that buying individual stocks is substantially cheaper than buying mutual funds. Mutual fund fees are forever as long as one owns the funds. But many custodians allow purchase of stocks and bonds with no fees, and as long as one holds them, there are often no fees equivalent to mutual fund fees.
Benefits and Detriments
One of the many benefits of mutual funds is their diversification. The average person does not have the resources to diversify their portfolio to the extent that a mutual fund manager does.
Since the contents of a mutual fund are not secret, any person can research and if desired can buy some of the individual stocks.
Holding individual stocks in an IRA will not eliminate all fees, but it seems to me that one’s expenses would be lower.
As a dividend investor that specifies dividend reinvestment for my holdings, owning dividend-paying stocks in an IRA is an easy way to increase my share count, while taking advantage of the deferred-taxation of an IRA. When this is done in a Roth IRA, I know that when I eventually make withdrawals, it will all be tax free.
The Rainbow Over The Backyard photo was taken in March 2024.
The post Can IRA Expenses Be Reduced? appeared first in Smile If You Dare.