By JLP | March 30, 2007
Check this out. Below is a summary of two portfolios I have been tracking. These portfolios are invested in EXACTLY the same thing with EXACTLY the same allocation. Yet, Portfolio A has had an average annual rate of return of 11.00% compared to Portfolio B’s 12.67%:
So, what accounts for the difference?
Portfolio A started out with $10,000 while Portfolio B started out with $100,000, while the account fee stayed the same ($199).
The account fee stayed the same because I’m simulating these portfolios using FOLIOfn‘s fee structure. Naturally, as the portfolio grows, the smaller the fee becomes as a percentage of the account value, which increases the net return.
There’s not a lot that can be done about this. Sure, you could probably find a cheaper brokerage firm (something I’ll go into later). For the most part, investors with smaller account values just have to suck it up and work on growing their portfolios. I definitely wouldn’t let this stop me from investing.