top of page
sa gold markets text white _edited.png

Why Investment Fees Matter More Than You Think (And How Gold Is Different)

The Silent Wealth Killer

Imagine someone quietly taking money from your retirement fund every single year. That's exactly what high investment fees do, and most people never realise how much they're losing.

Here's the shocking truth: Even fees that sound tiny can steal over R100,000 from your future. Let's break down why this happens and how gold investments work differently.


The Setup

We're looking at a typical South African investor who:

  • Starts with R100,000

  • Invests for 20 years

  • Earns 8% per year before fees

Sounds simple, right? Now watch what fees do to that money.


Four Ways Fees Destroy Your Wealth

1. The Shrinking Snowball Effect

Think of your investment like a snowball rolling downhill, getting bigger as it picks up more snow. Every rand you pay in fees is like someone scooping out a handful, that money is gone forever, and so is all the future growth it would have created.


2. Death by a Thousand Cuts

Your fees don't come from just one place. You might pay:

  • Your investment platform (0.2%)

  • Administration costs (0.6%)

  • The fund manager (0.5%)

  • Your financial advisor

  • Trading costs every time something is bought or sold

Those "small" percentages? They add up to 1.3% or more. Every. Single. Year.


3. The Performance Fee Trap

Some fund managers say "We only charge extra when we do well!" Sounds fair, until you realise they might take 10–20% of any gains on top of their regular fees. In a good year, you're paying way more than you thought.


4. The Hidden Costs

Every time your fund manager buys or sells shares, there are trading costs. These aren't always shown clearly, but they eat into your returns just the same.


The Eye-Opening Numbers

Starting with R100,000 and investing for 20 years at 8% growth:

  • Pay 0% in fees: You end with R466,096

  • Pay 0.2% in fees: You end with R449,133 (you lost R16,962)

  • Pay 1% in fees: You end with R386,968 (you lost R79,127)

  • Pay 2% in fees: You end with R320,714 (you lost R145,382)

The brutal reality: Every 1% you pay in annual fees typically costs you 15–20% of your final wealth over 20 years.

That "small" 2% fee just cost you R145,000. Suddenly it doesn't sound so small, does it?


Why Gold Plays by Different Rules

Gold investments work differently because most costs are one-time expenses or simple storage fees, not the compounding annual charges that traditional investments hit you with.


Physical Gold (Coins and Bars)

What you pay:

  • A one-time markup when you buy (the dealer needs to make a profit)

  • A one-time discount when you sell (dealers buy back at slightly less)

  • Storage and insurance: Maybe 0–1% per year if you use a vault, or the cost of a safe and home insurance

What you DON'T pay:

  • No fund manager taking a cut every year

  • No performance fees

  • No financial advisor fees (unless you hire one separately)


The catch: Those buying and selling spreads can be a few percent each, so gold works best when you plan to hold it for years, not trade it frequently.


Gold ETFs (Exchange-Traded Funds)

These are easier to buy and sell than physical gold:

What you pay:

  • A management fee (TER) that's usually lower than active stock funds

  • Trading costs when you buy or sell (smaller than physical gold spreads)

What you DON'T pay:

  • No performance fees

  • No storage hassles


How to Protect Yourself

1. Attack recurring fees firstA fee you pay once hurts. A fee you pay every year for 20 years is devastating.

2. Go simple and cheapLow-cost index funds or gold ETFs beat most expensive "actively managed" funds once you account for fees.

3. If you buy physical gold, hold itDon't trade in and out. Buy, store it safely, and let it sit. This spreads that one-time buying cost over many years.

4. Know your TOTAL feeDon't just look at one number. Add up everything: platform fees + fund fees + advisor fees + trading costs. Aim for 0.5–0.8% per year total for a simple portfolio.

5. The Golden QuestionBefore choosing any investment: "Will this earn enough extra return to justify its extra fees?" If not, walk away.


Avoid These Traps

  • Not knowing what you really pay: Get everything in writing and calculate your total annual cost

  • Trading too much: Rebalance once or twice a year maximum, don't react to every news headline

  • Forgetting about taxes: Use tax-free savings accounts when possible, and remember you'll pay capital gains tax when you sell


The Bottom Line

Your goal isn't to find the absolute cheapest investment. It's to find the one that leaves you with the most money after fees and taxes, while matching your needs for safety and access to your cash.

  • For gold: Use ETFs if you want to buy and sell easily. Use physical gold or vaulted bullion if you're holding for years as part of your long-term safety net.

  • Trade rarely: Every trade costs money

  • Know your numbers: That innocent-looking 1.5% annual fee could cost you six figures over your investing lifetime


Think of fees like termites eating at your financial house. You might not notice them at first, but over 20 years, they can destroy everything you've built.


Buy Gold and Silver at www.sagoldmarkets to get the best price and avoid annual fees.

 
 
bottom of page