Go Low Cost

- Alan Lavine and Gail Liberman

The average common stock fund sports an expense ratio of 1.4 percent. Say your fund earns 10 percent this year: Your net return is 8.6 percent.

No-load index funds are the cheapest way to go. Vanguard and TIAA-CREF have index funds that cost about .2 percent annually. Plus, the funds are commission-free.

Index funds typically outperform the majority of actively managed stock funds over the long term, according to Morningstar Inc., Chicago. So this is a low-cost way to get above-average performance.

Overpaying for mutual funds is costly. Assume you invest $10,000. An extra 1 percent in annual expenses for 10 years means you'll pay an extra $1,046 in expenses.

If you want a tax-deferred variable annuity, it also pays to stick with no-load investments. A variable annuity is a contract with a life insurance company. You invest tax-deferred in mutual funds. When you retire, you can get periodic income for life. Annuities also have death benefit guarantees. When you die, your heirs get the market value or the principal value, whichever is higher.

Vanguard, TIAA-CREF, T. Rowe Price, Fidelity and Schwab have low-cost variable annuities.

No-load variable annuities typically charge over 1 percent less annually than broker-sold annuities.

What if you truly need help with your investments and financial planning? Consider sticking with fee-only financial planners. They charge about the same hourly rate as Certified Public Accountants.

Avoid financial planners that get paid commissions for selling you investments and insurance. It's not a good idea to get financial advice from a salesperson. Regulators have been cracking down on brokerage firms for allegedly getting kickbacks from insurance companies and mutual funds to sell their products.

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Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).