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There are many kinds of fees when you invest your money. But according to our Money Coach Bill Stanley, the value added for many of these fees is just not there. So his advice is to "watch your wallet."

For example, Stanley said to take the fees on a mutual fund. A mutual fund holds a basket of different stocks.

There are transaction fees when you buy or sell a fund, which includes a sales fee (also called a "load"). Sometimes this sales fee is applied when you sell, or is charged through a higher annual fee, he said.

“My advice: never, ever pay a sales fee either upfront or deferred,” Stanley said. “It is like giving a salesman $100; he puts $5 in his pocket and invests the other $95. You will never catch up to the investor who puts his entire $100 in a fund.”

Stanley said we can buy many mutual funds without paying any sales fee, and, generally, these are better funds.

Perhaps the biggest hidden fee is the annual fee on the mutual fund itself, he said. The average annual mutual fund fee runs around 1.5 percent, with many financial planners “recommending” investments with even higher fees.

“I recommend 'passive' mutual funds which have lower annual fees,” Stanley said. “These funds follow an index. The higher fees come with 'managed' mutual funds which try to beat an index.

“The comparison goes like this: in one corner is a group of 10 so-called industry experts who get paid $300,000 a year to select stocks from the S&P 500 index. In the other corner is a $1,000 computer that buys all 500 stocks in the index. Eighty-five percent of the time in the short run the computer wins; the computer wins 98 percent of the time in the long run. Bottom line: buy low-fee index funds.”

Stanley said there are other fees such, too, such as inactivity fees. He said the biggest single indicator to determine whether a mutual fund will perform well is the total fee.

However, he said there is good news on the horizon.

“I recently read that Harvard Business School and University of Pennsylvania's Wharton School are changing the way they teach MBAs. The new courses shift the predominant focus from financial success to ethical business. So, in about 40 years when these new graduates reach senior management positions, the fees perhaps will be aligned to the value added. In the meantime, 'watch your wallet!'."

Bill Stanley and Money Matters airs every Tuesday on FOX21 Morning News.
If you have a question for Bill, contact him directly: MoneyCoachBill@aol.com