The Truly Hidden Fee: Your Time
The time you put into managing your money can add up like any other investing cost
Calculate how much time you put into your money; it adds up, like any other investing fee.
There’s a point of diminishing returns when it comes to spending time on your money.
What’s your time worth? A lot, you might say. But it can be hard to put an exact price on it.
You might charge a day rate, if you’re a consultant. Or maybe you’ve divided your paycheck based on your time at work, just to gauge your hourly rate. But that’s different from what your personal time is worth to you.
Does it matter? Yes. If you viewed your time as you would any other investing fee—expense ratios, loads, trading charges, 12b-1 fees, etc.—those hours likewise would have an impact on your returns.
After all, the time you spend managing your money is a maintenance fee of sorts. And as with other investing costs, you ideally receive a benefit (you’re getting better information, expertise, you hope). But it’s important to be clear: your time is an expense, like the others, and shouldn’t be invisible when you’re calculating your overall returns.
Again, it’s hard to measure, in large part because most people view time as a part of the upfront cost of investing. Also: time isn’t really a direct expense, like a measurable 1% fee. But although time spent is a hidden fee, it’s a tangible loss, because as everyone’s financial life grows more complex, it takes more time to monitor and manage every task.
You might spend time:
Gathering information about funds, companies, markets, and trends (i.e. reading the news, watching TV) and discussing the information, with friends, colleagues, advisors, your spouse/partner
Analyzing companies and funds in an excel sheet, checking an asset allocation, managing it dynamically
Planning (anticipating, worrying, weighing various priorities and outcomes)
How many basis points is that?
What do you get for the time you spend?
Now we’re getting closer not just to the value of your time, but how you value your time. It may be worth it to spend time on your money—to feel in control, to feel safe, to be informed. But if you could cut a 1% expense ratio in half, you’d jump on those 50 basis points. What would it feel like to cut your yearly time-spend in half?
There is a point of diminishing returns, when it comes to the time you invest in managing your money. And there’s more and more evidence suggesting that most long-term investors stand to gain the less time they invest: typically, more time = more attention, which increases the likelihood of emotional reactions and biases that can drag down returns.
Plus, look at the personal upside: If you could gain some time, say, an extra hour or two a week—a free afternoon (or two) per month—what would that be worth to you?
How would you like to get started?
Manage spending with Checking
Checking with a Visa® debit card for your daily spending.
Save cash and earn interest
Grow your cash savings for general use for upcoming expenses.
Invest for a long-term goal
Build wealth or plan for your next big purchase.
Invest for retirement
Set up traditional, Roth, or SEP IRAs to save for the golden years.