Smart Money Podcast: Why to Sell Your House, and Managing Investment Fees

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode starts with a discussion with NerdWallet data writer Liz Renter about why now might be a great time to consider selling your house.

Then we pivot to this week’s money question from a listener’s voicemail. Here it is: "Hi, this is Danny in Fort Worth, Texas. I was curious about fees paid on investments like mutual funds and ETFs, things like expense ratio commissions, etc. How does it work and how closely should an average investor be watching the fees on their 401(k) tax for brokerage accounts or other investment vehicles? Thanks so much.”

One more note before we get into this episode’s money question segment. We are diving into student loan debt for a new podcast series and we want to hear from you.

If you have student debt, tell us, in a minute or less, what it would mean for your life if your loans were forgiven. Or if you’ve already had your debt forgiven through existing programs, let us know what that did for you.

You can leave a voicemail on the NerdHotline at 901-730-6373 or email a recorded voice memo to [email protected].

Check out this episode on any of these platforms:

• Apple Podcasts

• Spotify

Our take

There’s no doubt it’s tough to buy a home right now. But data writer Liz Renter says that the benefits to sellers may be too good to pass up. Houses are selling quickly, and few buyers are asking for incentives. Sellers are not likely to spend as much making the house attractive to buyers or making repairs.

Especially if you are looking to buy something less expensive, you may be wise to go ahead and sell while prices are high and houses are getting multiple offers. It’s wise to have a solid plan for your next steps, and having an agent on your side can help you navigate that.

Investment fees may be charged by your brokerage and other investment companies for everything from making a stock trade to closing your account. There are even fees for premium research tools or investing data. You can avoid some, but not all, of these fees.

Start by knowing the types of fees:

• Trade commissions are fees you pay every time you make a trade, as when you buy stock. Some brokerages no longer charge these.

• Expense ratios affect funds, like mutual funds or 401(k)s. They cover the cost of managing the funds. Index funds are passively managed and tend to have lower expense ratios, while funds actively managed by a person or robo-adviser tend to be much higher.

• Other fees can include annual fees, inactivity fees, research fees, and opening or closing fees.

Over time, seemingly small differences in fees can result in large differences in the money you accumulate, so it’s worth paying attention to them.

Our tips

• Know what the fees are: They go by many names, but make sure you understand the underlying structure.

• Understand which fees you are being charged: Different accounts and investment companies have different fees and charges.

• Shop around: Examine your investments and look for cheaper options if the fees you’re being charged are higher than you’d like.

More about investment fees on NerdWallet:

Mutual Fund Fees: A Guide for Beginners

Typical Mutual Fund Expense Ratios

Which Robo-Advisor Is Right for You?

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Welcome to the NerdWallet’s Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Sean Pyles.

Liz Weston: And I'm Liz Weston. Let the Nerds answer your money questions. You can call or text us at 901-730-6373. That's 901-730-NERD. Or email us at [email protected]. To get new episodes delivered to your devices every Monday, be sure to subscribe. And if you like what you hear, please leave us a review and tell a friend.

Sean: This episode, Liz and I answer a listener's money question about fees on their investment accounts. One tip: Shopping around can help you minimize the fees that you pay. Before we get into that, in our This Week in Your Money segment, we are talking about why you might want to sell your house right now. And this conversation is inspired by a recent piece by NerdWallet data writer Liz Renter, who is here to join us for the conversation. Welcome back to the podcast, Liz.

Liz Renter: Hey, thanks for having me again, Sean and Liz.

Sean: It's great to talk with you. And I will admit when I first saw this article, I was kind of skeptical as a homeowner. Why would I want to sell my house? So given how nuts the market is right now, why would someone want to wade into the market again?

Liz Renter: You're absolutely right, and I think everyone knows how crazy it is to buy a home right now. But the very things that make it such a tough time to buy, make it a really incredible time to sell. I'm going to go out on a limb and say probably many people would find that if they really weighed the pros and cons of selling their current home and buying another, they would probably find that the benefits of selling right now could outweigh the risks of buying or the stress of buying. And particularly if they prepare well enough in advance for the potential obstacles in buying, selling now is really going to make it worthwhile.

Sean: Sell me on why that might be. I need some reasons here.

Liz Renter: Yeah, sure. I mean, there's a shortage of homes on the market, right? And demand is huge. People still want to buy houses. That lack of supply, high demand is driving prices up. Sale prices are the highest they've been in quite some time. And we also know that seller satisfaction is up. We know that people walking away from selling their homes are more satisfied with how the whole process is panning out because they're having to give up less throughout the transaction.

Liz Weston: That really stood out to me too, that because it's a seller's market, you're not going to have buyers throwing up all kinds of obstacles and making all sorts of demands. You can just sell it, get your money and go.

Liz Renter: The ball is in the seller's court right now, so they have a ton of power.

Sean: Yeah. I guess my hangup is once you get your money and go, where are you going to go?

Liz Weston: There. Yes.

Sean: Because then you're a buyer again and you have to compete with so many other people. So, that's what my hangup is in particular.

Liz Renter: Yeah. You're not alone, Sean. We found in our annual home buyer report that 89% of people who want to list their home right now say there's something standing in their way. And most of those people cite obstacles related to reentering the market as a buyer. So, a lot of people that are holding off on selling right now are absolutely scared of buying again.

Sean: I talk with my partner all the time about what would we do potentially if we each sold our houses and bought a new one, and we realize that we probably wouldn't be able to get that much more than each of us currently has house-wise because houses have gotten so much more expensive in the Pacific Northwest.

Liz Renter: That's a really important callout. I mean, in order to really make the most of this market as a seller, it's going to depend on what your next steps are. Where are you going next? Look, if you want to sell your house and not be a homeowner, you're in a great position.

Sean: Right.

Liz Weston: Like if you want to go back to renting.

Liz Renter: Yeah. You're going to move in with someone, you're going to go live with your parents, you're going to go live with your partner, whatever the case may be. If you're going from homeowner to renter or another situation, I mean, you only stand to benefit right now. But yeah, if you're selling in order to buy again, there are going to be challenges.

Sean: I think a lot of people can see selling your house and then going back to being a renter as a step backwards, but I think it can really also be a reflection of shifting priorities. There's nothing wrong with being a renter. Gives you a lot of freedom.

Liz Renter: Yeah, absolutely. And we find year after year when we run these surveys, is that a certain portion of people who purchase a home regret it for one reason or another. A lot of times they underestimate the amount of work and the costs involved in home ownership. And so, for some people it's not the right solution and renting is better for their life circumstances and there certainly shouldn't be any shame in that.

Sean: Mm-hmm (affirmative).

Liz Weston: But there are also situations like yours where you went to an area that wasn't as competitive, and having more money right now from selling a house could be hugely helpful if you do something like that.

Liz Renter: I said earlier, depending on how prepared you are when you go into this market as a seller is going to sort of allow you to lay the groundwork to make the buying experience easier. You're right, Liz. I went from living in the Raleigh, North Carolina, metro area to rural Kansas. I went from a very competitive market to not so much.

Liz Weston: They were glad to see you coming.

Liz Renter: Yeah, exactly. Selling for me was kind of a no-brainer when I was coming here because buying here is not going to be a challenge, but not everybody has to go to that extreme. You can move from a very hot neighborhood to one that's a little less competitive and really reap the benefits of the sale in that scenario. You don't have to move halfway across the country to farmland if you don't want to.

Sean: Yeah.

Liz Weston: Well, and I was thinking of another scenario that affects people who are older, which is a lot of people are thinking about downsizing someday. Moving to a retirement community someday. And maybe it's time to consider doing it now, because if you have that big family home that everybody wants and you want a smaller home to take care of, even if you're in the same market, you'll probably have less competition when you buy but you'll get plenty of offers when you sell.

Liz Renter: You know, Liz, that point, so some generational effects that we've been seeing on the number of homes on the market, even before the pandemic. Baby boomers are more comfortable aging in place than older generations before them, so they're less likely to come up off of the house that they're in as early as other generations would have. That, paired with millennials being at prime home-buying age, means that there's just fewer homes available. And that's something that we were seeing before the pandemic. And then you add COVID to that and the apprehensions of selling during a pandemic, what was a slight housing shortage beforehand has really gone far to sink inventory incredibly.

Sean: Yeah.

Liz Weston: That's really interesting.

Sean: The housing inventory is pretty nuts right now. One thing that stood out to me in your article is that nearly 26 million Americans said that they plan to buy a house this year, according to NerdWallet's 2022 Home Buyer Report, but only 5 to 6 million houses are sold in a year typically. So, the math doesn't really work out for a lot of would-be buyers.

Liz Renter: We run this survey every year. I've been writing it for the past four years and every single time, there is just this unrealistic number of people who say they're going to purchase a home in the next year. And that was before COVID and now, and I don't want to tell people that their dreams are going to be dashed, but you're right: The math doesn't work out, 26 million Americans are not going to buy homes this year. It's just simply not in the cards.

I think part of that optimism has to do with when we ask the questions. So, we field this survey at the end of December to talk about the coming year, and think of your mindset at the end of December. You're thinking about, "Oh my gosh, this next year is going to be my year. I'm going to accomplish this list of goals 1 through 10, and everything's going to go my way."

So, I think that has something to do with the optimism. But then too, within that 26 million Americans who say they're going to purchase this year are people that put off their home-buying plans maybe last year or the year before because of the pandemic, maybe their income was volatile over the past few years. And so, some of them will be successful this year. Millions of people will buy homes this year. So, I think it's those that are braced for the challenge that will be successful.

Sean: Liz, one of the biggest appeals to selling your house right now, as you've mentioned, is profit. How much money are we talking about?

Liz Renter: So, there's a lot that goes into how much money you can make off your house: the type of house that you're in, the location that you're in, for sure. But what we can say is that sale prices are up close to 30% compared to a couple years ago, so you're going to be able to sell it for more.

Normally, we would say the profit that you make is essentially your sale price minus the balance on your current mortgage and any cost associated with selling your house. But what we know is that the costs associated with selling your house are extremely low right now. So last year, fewer than 1 in 10 sellers contributed to closing costs. You're also less likely to have to do repairs on your home in order to put it on the market. So, really then what it boils down to for a lot of people is just the sales price minus the balance on your current mortgage. And because we know sale prices are up 30% on average, your potential profit is up 30% on average.

Sean: Right.

Liz Weston: Anecdotally, I've heard from several people whose real estate agents basically said, "Vacuum the carpet." That's all you have to do. You don't have to do all the repairs. The house is going to sell no matter what.

Liz Renter: Right.

Sean: Oh, man. Interesting. So, houses are also moving really quickly right now.

Liz Renter: It's all happening very fast. In 2021, homes were typically on the market for less than a week.

Sean: Wow.

Liz Renter: That's compared to... I know, right? That's compared to three weeks just a couple years ago, and as many as 11 weeks, 10 years ago. So, one of the things that I would caution to people that are thinking about selling is to get all of your ducks in a row, have a plan of action and maybe start implementing that plan before you list your house, because this isn't a market where you can list your house and then dilly-dally while you wait on the offers to roll in. More than likely, you're going to be under contract in a matter of a week or two.

Sean: Folks can put in a term in that contract saying, you can get this house when I have a new house, which might take a little bit of time, I imagine.

Liz Renter: That's a very good point. If you're not certain about whether you want to take the risk of selling right now, an agent can help you build things into the contract that are going to sort of buffer those risks. Like you said, you can make the sale of your current home contingent on finding a new house and getting under contract. Also, because you have the power in this market, you have some flexibility on choosing the closing date. Less common but also an option is renting back the home after the sale closes. And so, the way that works is you make an agreement with the buyer of your home that you're going to stay in it for two weeks or four weeks after closing and essentially rent it from the new owner for those few weeks to allow you some additional time.

Sean: So, if someone is on the fence about selling their house, how can they decide whether it's right for them?

Liz Renter: I think the biggest question you have to ask yourself when deciding if it's right for you is, what is your plan afterwards? If it's not to buy, like we said earlier, well then great. Yes, you should probably sell right now. But if you are going to buy, figure out where you want to be and how competitive it is there. Will you get out ahead when you sell? What are homes selling for in your area?

So, a lot of these questions, a lot of this planning, is going to be made a lot easier with having an agent on your side to help you with both the selling process and the buying process, because while those are two transactions, they can help you connect the dots and time everything well. And not to mention, even when you're in the decision-making process, they're going to know how competitive the market is where you live versus where you're going, which really is going to be the crux of the decision that you make.

Sean: Liz, well, thank you so much for talking with us.

Liz Renter: Absolutely. It's always a fun time to be here and chat with you guys.

Sean: Yeah. All right. And now let's pivot to our no-spend month check-in. This is the final check-in of the no-spend month where, for the past month or so, Liz and I have been trying to not spend money on things that we do not need with the goal of shifting up our spending habits and hopefully saving some money. And Liz, how's it going?

Liz: Well, honestly, it was the least successful no-spend month I've ever done, just because there were so many unanticipated things that happened. So, I did not save a ton of money compared to a normal month. However, I did wind up fixing some stuff that I might have just replaced otherwise. We had two space heaters, for example, that weren't working. And normally in the course of things, I would take them to hazardous waste and pick up new ones and not think twice about it. But I did take a little time, looked on Google, figured out how to fix them. They just needed to be cleaned. Literally, they just needed to have a vacuum go over them and they worked fine.

Sean: That's kind of incredible.

Liz: It is. And it kind of made me feel bad that I've thrown these things away before, so.

Sean: Yeah. Well, it speaks to how we are used to consuming and discarding things as Americans, in particular. “Oh, it's not working right today. Probably broken. Chuck it, get a new one.” But you can just dust it off and it's working fine.

Liz: Well, you also can find out what products have a reputation for lasting longer. So that's another goal of mine, is to make sure that the things I'm buying have a little longevity in them so that I'm not constantly replacing and throwing things into the landfill.

And the other thing I did was I took care of a bunch of returns. That's another thing. I tend to let things sit until it's too late, and this time I just did it basically in one long errand-running day. I got everything back where it should be, so.

Sean: Nice. Just knock it all out.

Liz: That part I feel really good about. How did it go for you, Sean?

Sean: I think it went pretty well. Wrapping up this month, I'm proud of the way that I didn't spend money on things that I typically would and the way that I've been reevaluating my spending habits in general. I did have a couple unexpected expenses and allowances that I gave myself, and I'll start with those before I go into my saving.

So with the expenses, it was one of my best friend's birthdays last week, and another friend of mine banded together and booked the birthday girl a Dolly Parton singing telegram, which was some money but 100% worth it. It was so fun, and the video of it was incredible. I also bought myself this nice backpack that I've had my eye on as a little treat for my recent promotion, so I was treating myself there.

Liz: Congratulations.

Sean: Thank you.

Liz: Yes.

Sean: Thank you. Been working hard for that. That was something where I typically wouldn't be spending money on this, but I wanted to seize the moment and really appreciate all the work that I've been putting into this podcast and everything else in NerdWallet and reward myself. So even though it's the no-spend month, I still purchased that, which I feel OK about. I've also continued to say no to my eBay purchases. I got a bunch of emails from sellers offering me discounts on things that were in my watch list and I said no to all of them.

Liz: Oh, very good.

Sean: And that saved me a couple hundred dollars if I was to have purchased those things. In total, over the no-spend month I saved around $500.

Liz: Nice.

Sean: Which is a lot more than I was expecting, and it makes me kind of scared about the fact that I maybe would have spent that money otherwise. It's a good chunk of change. I was worried that I would be itching to buy stuff as the no-spend month wrapped up, and I really haven't. So, I think that that shows the effect of shifting up the spending habits. I'm no longer just turning to my phone to scroll through eBay if I'm bored. I am planning on keeping the shopping apps off my phone for the time being and continuing this dialogue with myself about what I truly want to spend my money on and why.

Liz: Oh, that's wonderful. See to me, those are huge successes. When you've really figure out, how are you using money, when you're spending when you don't need to? That's the benefit of doing one of these no-spend months.

Sean: And I'm taking all the money that I didn't spend, putting that into my “fun money” savings account and using that on my upcoming travel. So that way I have money to spend on totally discretionary things and I won't feel guilty about it.

Liz: Good for you. I love that.

Sean: Thank you. Well, one more note before we get into this episode's money question segment. We are diving into student loan debt for a new podcast series and we want to hear from you, our listeners. We want to know if you have student loan debt, tell us in a minute or less what it would mean for your life if your loans were forgiven. Or if you've already had your debt forgiven through existing programs, let us know what it did for you and your finances. You can leave us a voicemail on the Nerd hotline at 901-730-6373 or email a recorded voice memo to [email protected]. Now we can get into this episode's money question segment.

Liz: All right.

Sean: This episode's money question comes from a listener's voicemail. Here it is.

Listener: Hi, this is Danny in Fort Worth, Texas. I was curious about fees paid on investments like mutual funds and ETFs; things like expense ratio, commissions, et cetera. How do they work? And how closely should an average investor be watching the fees on their 401(k)s, taxable brokerage accounts or other investment vehicles? Thanks so much.

Liz: To help us answer Danny's question, on this episode of the podcast we're joined by investing nerd, Alana Benson. Welcome back to the podcast, Alana.

Alana: Hey, guys.

Sean: Hey. Before I throw a bunch of questions at you, Alana, we have to get one thing out of the way, a brief disclaimer, and that is that we are not investment advisors and will not tell you what to do with your money. All that we are about to discuss is for educational purposes. So OK, with that done, Alana, our listener, Danny, is primarily concerned with something called brokerage fees. Both trade commissions and expense ratios are forms of brokerage fees, but there are others too. Can you start off by explaining what brokerage fees are at a high level?

Alana: So, brokerage fees can be a lot of things. They're essentially fees that are charged by your brokerage and other investment companies for everything from making a stock trade to closing your account. And there are even fees for premium research tools or investing data. But the important thing is that some of these fees you can avoid, and some you just can't.

Liz: Let's break down the different fees paid on an investment accounts.

Alana: OK. So trade commissions: This is about how much it costs every time that you make a trade. If you bought a stock, they might charge you a little bit for that trade. Many brokerages have actually dropped these to zero, but you should always check with your individual broker to see how much a trade will actually cost you, because they can really vary.

Sean: And the trend of brokerages dropping fees to zero, isn't that a result of the rise of sort of gamification of trading through apps like Robinhood?

Alana: That was definitely a factor, but this happened a couple of years ago now. So, if you're finding a brokerage that is going to charge you for every single trade that you make, it's definitely worth shopping around because there are a lot more now that charge zero dollars per trade.

Sean: And what about expense ratios?

Alana: Expense ratios, these are what are charged on funds like mutual funds or exchange traded funds, and this is the cost of what it actually takes to manage the fund. Think of index funds. These are passively managed and they just track an index like the S&P 500, so it doesn't actually cost that much to manage them. And it can vary, but around 0.1% to 0.2% is a pretty good deal. So, that would be about $10 or $20 for every $10,000 that you invest. But if you have a mutual fund, that's actively managed and that means someone is picking and choosing the investments within the fund. So, it's a much more expensive fund to manage than a passively managed fund. And these can run closer to 0.5% or even over 1%. And that means instead of paying $10 or $20 for each $10,000 that you have invested, you're paying like $100 or more.

Liz: Ooh, that's a big difference. Now, our listener is also wondering about 401(k) fees. How should they think about those?

Alana: The investments that are available to you in your 401(k) may be more restricted than just buying different investments from a brokerage, but just because you may not be able to do as much about your 401(k) fees doesn't mean that you should not invest in one, particularly if your employer offers a match.

Liz: If you work for a company, a larger company, you may have access to institutional funds through your 401(k), and those are the cheapest ones you can get. So, the idea that all 401(k)s are expensive really isn't the case. The fees have come down and in some cases, you can do better in a 401(k) than you could in your own IRA when it comes to expenses.

Sean: I have a quick follow-up question around index funds and mutual funds. Is there a max fee that you think people should look for and say, "OK, this fee is too high for this account and I'm not going to go for that"?

Alana: I think that really just depends on each individual investor, and what's important to you and what you want to get out of the fund. Personally, when I look for funds, and again, I am not a financial advisor. But I try to find the cheapest management fees that I possibly can. So, I'll look for an index fund that will have a really, really low fee. But if you want something that's managed by professionals or you're looking for a particular type of fund... There's different reasons why people might pay a higher fee. If you're looking at a mutual fund and it wants you to pay 1%, that's a pretty significant fee.

Sean: I could see some people thinking, "OK, the fee is higher. That must mean I'm going to get a greater return or the results will be better for me," and that may not be the case, right?

Alana: And in fact a lot of times, actively managed investments, like those actively managed mutual funds, don't perform as well as passively managed funds because it requires people to sort of predict the market, which people, no matter how much experience they have into the industry or whatever their background is, people are just notoriously bad at predicting the market. And so, the likelihood that your actively managed fund will outperform the market is actually really low. So, you're kind of paying more to underperform in a lot of cases.

Sean: Doesn't sound like a good deal.

Alana: To each their own, but I'm inclined to agree with you, Sean.

Sean: OK.

Liz: Well, maybe we should give people an example of how much fees can cut into earnings. There's so much that you can't control with investing. You can't control the market. But the thing you can control is how much you invest and what you pay in terms of expenses. So, can you talk about how fees cut into earnings?

Alana: Absolutely. Say you invested that $10,000 into a fund with a 0.1% fee and you matched the average market returns. You'd have nearly $210,000 after 40 years. But if you had a 1% fee, you'd have just $150,000. So, that's a pretty significant difference just from a fee that you don't actually have to be paying.

Sean: That leads me to my next question, which is, how much should folks be worrying about their fees? And it seems like the answer is maybe a lot. A decent amount, at least.

Alana: Yeah. And like Liz said, this is something that people actually have some control over when it comes to investing, and there's not a lot of things that you do have control over. So, you should definitely look into your fees. But I don't think this is something that you should be super stressed about. Once you know what fees your brokerage charges, you can kind of adjust your plan. So if your brokerage charges a trading commission, maybe keep that in mind if you're regularly trading stocks. And you can also check out the expense ratios of funds that you're invested in and see how much you're paying, and maybe explore cheaper options if the fees are pretty significant.

Sean: Is there any room for negotiation? Say you've been with a brokerage for a while, you find another one that has lower fees, and you call up the brokerage that you've been with and say, "Hey, there's someone else over here that has lower fees. If you lower yours, I won't jump." Is that possible?

Liz: A lot of it is baked in terms of what they're going to charge you for trading commissions, if they're charging those, and what the expense ratios are of the underlying investments. But if you are paying someone to manage your money for you; if you're paying a financial advisor a 1% of assets fee, for example, or you're paying some kind of brokerage wrap fee, there may be some room. So, you can let them know that you're looking around and you think it's a little expensive what they're charging, and maybe you can get a break. One thing we should talk about is robo-advisors, because that's another way to get access to some pretty cheap investment accounts.

Alana: I love the idea of a robo-advisor, particularly for the folks who otherwise just would be too stressed out or not have enough time or get a little intimidated by the research that they should do to start investing on their own. And a robo-advisor is great because like you said, the fees are pretty minimal for the service that you get and you just don't even have to think about it. You don't have to know any of the lingo. All you have to do is set up an auto deposit and kind of forget about it.

Sean: Well, speaking of lingo, we should probably define what a robo-advisor is for those who don't know. These are services that use computer algorithms to build and manage a portfolio for you.

Alana: And when you invest through a robo-advisor, you're paying for them to manage those investments for you, so those fees will typically float around 0.25% of your assets. So if you have $10,000 managed, you'll pay $25. But remember, they're doing all of that work for you, so that's not just an expense ratio that you're paying; you're actually paying for a service.

Sean: Some brokerages will charge you for things like inactivity fees and robo-advisors don't tend to do that. Is that correct?

Alana: That's correct. Because essentially, a robo-advisor will be doing the managing for you so it's kind of tough to have an inactive account with a robo-advisor, particularly if you have auto deposits. There could be robos out there that do charge for that. So these fees will vary by broker or robo-advisor, so it's always really important to look into what fees you'd be charged before committing to one.

Sean: And one thing I'm betting our listener, and a lot of other listeners out there, are wondering is how they can reduce the fees that they're paying on investment accounts.

Alana: The first and most important thing is to just know what you're going to be charged. Expense ratios may not actually show up on your monthly statement. They'll likely just be deducted, so it's good to know what kind of expense ratios, whether you're working with a robo-advisor or you're buying investments on your own, what those fees are going to look like for expense ratios.

But the other thing is, is that you can always look at a brokerage or robo-advisor's fee sheet. This'll give you a whole list of every possible fee that they could charge you. So things like those closing or inactivity fees, that's where they'll be listed. So, definitely do your research ahead of time and just make sure you know what you'll be charged.

The second thing to do is look at your investment fees that you're already being charged. So if you're in an actively managed mutual fund, you can kind of consider some of those lower-cost investments like index funds. Look at the price point difference and see what you're comfortable paying.

Sean: This is also a good reminder for folks to shop around when they're looking for various investment accounts. When people are considering one account or another, how do you think fees should factor in?

Alana: Fees are pretty important because they do eat into your bottom line, but they are just one factor alongside performance and sector. If you wanted to invest in a particular fund, like emergent technologies; that kind of fund, because it's so particular, might be a little more expensive. You can look at the existing diversification in your portfolio. You can also look at what kind of tools and research that brokerage has because some are better than others, and if you really want to get into the nitty gritty of your investments, that might be something you're willing to pay a little bit more for. So just remember that fees are important, but it can be balanced with other things.

Sean: All right, Alana, I think that covers this pretty thoroughly. Do you have any final thoughts for our listener?

Alana: I think it's just really important for investors to remember that they are in control. They have the choice to make about what kind of investments matter to them. And some will charge more than others, but at the end of the day it's their choice, so they should remember that they have the power. If they're getting charged a really high fee, they don't just have to pay that. They can look around and find other options.

Sean: Great. Well, thank you so much for talking with us.

Alana: Yeah. Thanks for having me.

Sean: And with that, let's get on to our takeaway tips. Liz, do you want to kick us off?

Liz: It would be my pleasure. First, know what the fees are. They go by many names, but make sure you understand their underlying structure.

Sean: Next up, understand what fees you are being charged. Different accounts have different fees and charges.

Liz: Examine your investments and look for cheaper options if the fees you're being charged are higher than you'd like.

Sean: And that is all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That's 901-730-N-E-R-D. You can also email us at [email protected] and visit nerdwallet.com/podcast for more info on this episode. And remember to subscribe, rate and review us wherever you're getting this podcast.

Liz: And here's our brief disclaimer, thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers but we are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and may not apply to your specific circumstances.