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The fees you actually pay for index funds

As we started writing this blog, we also started reading other blogs about personal finance and FIRE. The blogs are all very different, but it seems as if they all agree to one thing… that investing in passive index funds is the shit! And we are not to blame them, as it very easily gives you a diversified portfolio at a much lower cost than buying actively managed mutual funds. But are the passively managed funds so cheap at all?

As readers of our blog know, we prefer to “invest like an index fund” rather than invest in an index fund (Single stocks or index funds?). The main reason for this is costs. Cost structures for buying single stocks is extremely easy to understand, as it is the commission fee you pay when you buy and sell the stock.

Portfolio update – February 2018

February started out with some wild volatility in which we bought one new stock – Procter & Gamble. As you can see below that wasn’t the best idea, haha. Hopefully it will become a winner in the long run.

We ended up being down -2.4% which isn’t that bad compared to the indexes. In January we wrote about single stocks vs index funds and for that month we concluded that our returns was quite far from the index’s. Looking at the chart below, you can see that our return this month follows the returns from the indexes quite well. It shows that with a somewhat diversified portfolio as ours, you start to have a portfolio that tracks what happens in the market pretty good.