9 questions to ask before investing

You would think that managing an investment portfolio for returns and risk should be sufficient to protect your interests as an investor. But costs and taxes are an integral part of financial products, and they can bleed the returns your money can earn. Not only does it take a bite out of your returns, but you miss out on compounding benefits too as this portion is no longer available to be invested and earn returns.

The impact of expenses on the returns can be significant. For example, an increase of just 1% in the annual expenses charged to an investment translates into a difference of close to 16% in the final value of your investment over a 20 year investment period. This difference goes up to over 20% if the holding period is 25 years. Similarly, taxes are dues that you have to pay on the returns that you earn which diminishes the amount you have to invest further and earn.

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