By investing in equity funds, you can achieve a net annual return on investment of approximately 9% (portfolio Finax 100/0). But if you decide to invest in mutual funds or other unfavourable programs, it could cost you thousands of euros due to high fees, not taking advantage of tax reliefs and poor return on investment.

The average equity fund sold in Slovakia is lagging behind Finax's portfolios by more than 3% per year. Lost return, a return that you will not be able to achieve due to a bad investment, is equal to a loss. Why should you deprive yourself of something, that can be easily earned on the market?

Compound interest can work for you as well as against you. Like returns, costs multiply over a long period of time. At first glance a few percent difference might not seem as a deal-breaker. However, high fees are one of the biggest thieves of property.

You are not "only" losing on a few tens or hundreds of euros a year due to higher management fees. You are also unable to take advantage of the profit that your unnecessarily paid money could have made.

Let's have look at the graph where we can see how fees affect the investment result. With an investment in the Finax equity portfolio, you would earn more than 13 times the deposit over 30 years (e.g. deposit of EUR 10,000 would result in value of the investment of more than EUR 132,000). However, if you invest in a product with a fee that is 2% higher than Finax’s, you will receive less than 8 times the amount of deposit (EUR 76,000).

You might ask yourself how can I acquire EUR 10,000. If we consider current property prices, it is achievable by buying a flat that is smaller by a few square meters. Wouldn’t you tighten your belt now in order to live much better later?

Financial markets will provide you with a better pension

If you made a deposit of EUR 10,000 in Finax, after 30 years you can draw a monthly pension of EUR 550, which as an addition to the state pension is something to consider. The total value of your investment (EUR 132,000) consists of more than 90% from the return. I hope, that by visualising this investment, it will be easier putting off today's consumption in favour of better future.

But if you choose a financial product with a return that is 3 percent lower, you would only improve your monthly pension by EUR 240. Same deposit into more expensive financial product will lead to half the additional pension.

You do not have to be so generous with your portfolio manager. I do not believe that you like either your bank or your investment company so much that you would be willing to share half of your monthly pension with it. 

Carefully evaluate how much money you spend and where. As I have shown you, the difference between advantageous and expensive product is tens of thousands of euros.

If your bank persuades you that you receive better service for higher charge, do not trust them. You often come across the phrase that the higher price of a BMW compared to a French car is justified because of its higher quality. However, this is not the case in finance. In fact, expensive solutions bring the worst results most of the time, so why wouldn’t you try to get best bang for your buck?

The era of overpriced investment products ended with the arrival of low-cost ETFs, where you can even use tax reliefs. If you’d like to share your profit with someone, donate a portion of your earned money to your favourite charity instead of a manager or a state.