Interested in improving investment returns? Can reducing fees have a significant impact? Typically, fees are expressed as a percentage of assets under management, often something like 2%. At a glance, that doesn’t seem unreasonable. 2% a year isn’t all that much. Indeed, 2% of actual investment returns isn’t unreasonable, but 2% of your principal is. If your investment fund returns 6% before fees, a 2% asset charge means fees add up to one third of your returns. If returns are lower, your advisor’s share actually goes up. The average actively managed Canadian mutual fund charges 2.5%. Check out the above calculator to see how your returns are split between you and your advisor.

Indexed funds don’t try to beat the market, they try to replicate it. Since they don’t select individual securities, their fees are lower than actively managed funds. In his annual letter to Berkshire Hathaway shareholders Warren Buffet recommends: The 21st century will witness further gains, almost certain to be substantial. The goal of the non-professional should not be to pick winners — neither he nor his 'helpers' can do that — but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost S&P 500 index fund will achieve this goal.

The Vanguard 500 Index Fund (VFV) is a low cost exchange traded funds with an asset charge of 0.08%. Try the calculator to see how that increases your share of your portfolio’s return.