How compounding costs can be bad for your money 😬

Updated 4 months ago ​by Valeria Gasik

Just like investment returns or interest rates, fees compound over time. 

As fees are deducted from your investment, this means you invest less money and your investment can grow less.

Let’s have a look at the following comparison:

A. Selma

B. Standard Mutual Fund

Initial Investment

50.000

50.000

Annual Management Fee

0,72% (max)

1,5%

Product Costs

0,22%

Yes, it's higher,
but keep on reading...

0%


Transaction Fee

0%

CHF 50.00

Entry Fee

0%

0.5%

Exit Fee

0%

0%

Custodian Fee

0%

0,3%

Total Costs

0.94%

> 1.8%

What does this means in practice?

Let’s assume you would earn every year stable 5% return on your initial 50.000 CHF investment. After 15 years in 2032, once robots have taken over the world and Elon Musk has built a Hyperloop from NY to Paris, this is where you stand:

A. Selma

B. Standard Mutual Fund

Initial investment

50’000

50’000

Return on investment

5%

5%

Earning in 15 years

+ 40’829.59

+ 29’667.17

After 15 years

90’829.59

79’667.17

Because of the compounding costs the difference is staggering CHF 11’162.42.  

It's 22.32% of your initial investment!

When not being cautious, fees can easily have an impact up to half of your investment over the lifetime. This is why Selma optimises your investments and keeps your costs transparent and as low as possible.

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