Last week Fallen Angels Stocks received many emails railing against the “Dirty Little Secrets” article I wrote last Monday. It seems that I really touched a nerve with a lot of folks out there. Let me clarify my position; Dollar cost averaging over the long term is not a terrible strategy. There is however one glaring fault in it that could cost you over two million dollars!!

Let me explain.

Wall Street has spent millions convincing the public that they are the sole keepers of your financial future; and for a small nominal fee (usually 1% annually) they will guide you through the perilous investment waters to deliver you to the land of your financial dreams. It’s an interesting fairy tale and it would be a humorous one at that if it weren’t for the fact that so many people have bought into it.

But let’s take a closer look at this strategy before we dismiss it out of hand. Maybe the buy and hold approach is the right one after all, and why should we begrudge the mutual fund boys their 1% fee? After all it’s not like they their not working hard for that money, generating new ideas, poring over research and committing huge amounts of energy to generating money making ideas.

Actually, they’re not.

75% of all mutual fund equity is invested in the S&P 500. 87% of mutual fund performance is correlated to the S&P 500!! Want to know another dirty little secret that the Wall Street firms hope you don’t find out?

YOU DON’T NEED THEM TO ENACT THIS STRATEGY!!

Do you want to know how to do this on your own?

Well here it is, just buy 5 different exchange traded funds, one for big cap & small cap growth, one for big cap & small cap value and a diversified international exchange traded fund. Dollar cost average in every month/quarter and after thirty years you’ll have about an average compounded 11% rate of return (that is if you also reinvested all of your dividends).

That’s it! Pretty simple huh? No wonder the firms love this approach! It’s so profitable for them. They have you feeding them money every month, all they do is passively invest in mutual funds. That’s it! My eight year old daughter could do that!!

“But it’s only 1% a year and I don’t have to be bothered with it” I can hear some of you saying. Let me show you how much that 1% per year is costing you over a thirty year period. Let’s say your 35 and you invest $1,000,000 in a retirement portfolio of 5 diversified exchange traded funds as outlined above. You go about your business for the next thirty years, building your career, raising your family, going to church and living life. Lo and behold 65 is here before you know it. Now all things being equal your $1,000,000 through the magic of compounding should have grown to $8,000,000, right?

WRONG!!

You forgot about your friendly neighborhood brokerage firm. They have to be paid for all of the “work” that they did. Here’s what it cost; after THIRTY years of paying out 1% annually in fees it has cut your retirement nest egg BY A THIRD! Instead of $8,000,000 you will receive $5,333,333!!

Think about that for a second. You just paid out over $88,000 a year in fees and lost capital gains (TWO MILION SIX HUNDRED AND SISTY SIX THOUSAND DOLLARS) for something you could do by yourself!!  It is insanity to give up one third of your entire portfolio to enact this “no brainer” strategy!!

 Isn’t it time to start taking your own financial reigns?