I’ve heard from life insurance salesmen that their commission to make a sale is around the ENTIRE first year of premiums. i.e. if you sign up for a life insurance contract that costs $500/month your salesman stands to earn $6,000 from making that sale. WILD. It shows how much profit/overhead is built into those products, and how little value is left for the consumer.

Compare that to an index fund. If you put $6,000 into an index fund, like VTI for example (Vanguard’s Total US Market ETF), there’s an expense ratio of 0.03%. That means, the total cost to you for the first year is $1.80. Not thousands of dollars. A buck and 80 cents. The other $5,998.20 is directly working for you, owning shares of companies of the world who will innovate, profit, grow and return that value back to you in increased share price and dividends.

Beware of the financial salesperson. Whatever they’re pushing has high fees to cover their commissions. The humble index fund doesn’t have any salespeople. The math doesn’t work to hire people to sell something that could only have $2 of commissions. But those low fees mean money that stays in your pocket and compounds to grow even greater for years to come.

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy

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By: Gabriela Gonzalez
Title: The $6,000 commission vs the $1.80 index fund fee
Sourced From: www.personalfinanceclub.com/the-6000-commission-vs-the-1-80-index-fund-fee/
Published Date: Wed, 14 May 2025 02:16:13 +0000

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