Investment costs are the worst enemy of portfolio returns.  Seemingly small fees can have an enormous effect on long-term returns.  Investors must vigilantly protect their portfolios against any unnecessary expenses.

Unfortunately, most investment costs are invisible to the average investor.  The majority of expenses are contained within the investment vehicle (such as mutual funds or ETFs), but because investors never see an itemized list of these fees, they never know how much they are paying or how severely the fees are eating into their returns.  This is a critical error.

The most effective way to minimize investment costs is simple: own low-cost investments.  Passively-managed mutual funds and ETFs typically have dramatically lower costs than their active counterparts.  Geometric prefers mutual funds and ETFs managed by Dimensional Fund Advisors and Vanguard because we believe them to be the lowest-cost options that provide the best value to our clients.

It is also important to minimize the costs associated with buying and selling these investments.  Transactions costs add up, and can result in a meaningful reduction in portfolio return.  At Geometric we perform a systematic cost-benefit analysis on every transaction to determine whether the benefits (rebalancing needs, effective cash utilizations, etc.) exceed the costs (transaction fees and tax implications) for that particular client in that particular situation.

Lastly, it matters where investments are held.  We choose Charles Schwab as our custodian in part because it shares our commitment to low-cost investing, and we work closely with them to negotiate the lowest possible costs for Geometric’s clients.