The hidden cost of expensive broker fees
Whenever I speak to people about broker fees, I find that many underestimate the impact these fees can have on their long-term wealth.
Let’s consider an example.
Suppose you have two brokers: one charges 0.4% in fees, while the other charges 1.35%. If you invest ₦1 million every month on the NGX for the next 10 years, you will have invested ₦120 million in total. Assuming your portfolio earns 25% annually, it could grow to approximately ₦450 million.
If I ask people to calculate the difference in fees paid over those 10 years, most would say:
(1.35% − 0.4%) × ₦120 million = ₦1.14 million in additional fees.
That doesn’t seem like much compared with the roughly ₦330 million in investment gains.
However, this is where most people get it wrong.
The true cost is much higher because money paid in fees is money that can no longer compound.
By choosing the cheaper broker, you save ₦9,500 in fees every month. If you invest those savings in the same portfolio earning 25% annually, they could grow to approximately ₦4.2 million over 10 years.
That is more than 3.6 times the ₦1.14 million in additional fees initially calculated.
Now imagine investing ₦5 million or even ₦10 million every month on the NGX for the next 10 years.
The potential cost of choosing the more expensive broker rises to approximately:
➡️ ₦5 million invested monthly: ₦21 million in lost wealth.
➡️ ₦10 million invested monthly: ₦42 million in lost wealth.
All because of a seemingly small difference in broker fees.
The lesson is simple: when investing for the long term, don’t just calculate the fees you pay. Calculate the wealth you lose when that money can no longer compound.
Small percentages can have enormous consequences over time.
i pray for the parts of you that you don't talk about,the stress, the overthinking, the silent battles.
may God bring you peace in those places, amen
goodnight mutuals