FSMOne RSP - How to calculate the management fee?

So say I would like to invest a monthly RSP of USD$50 into IVV and IVV has a management fee of 0.03% p/a. This part, I am clear.

What I am a little confused is that FSMOne charges me 0.08% or min USD$1 (in this case, the latter assuming USD$50 p/m) for every monthly RSP transaction. So is this equivalent to 2% fee of my monthly RSP (USD$50 per month) and hence it actually 'make more sense' to increase my monthly RSP amount I.e USD$100?

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thefrugalstudent

01 Nov 2021

Founder at thefrugalstudent.com

Hi Anon,

Yes, your understanding is correct. When it comes to minimum fees as per the case of FSMOne's RSP, it always 'makes more sense' to make each transaction/investment as close to the upper limit that would otherwise incur a fee that is higher than the minimum.

This will help to reduce the amount you pay in fees in terms of a % of what you're actually investing.

As you've calculated, you're paying $1 for every $50 invested which translates into a fee of 2% which is considerably high in terms of %. Increasing it to $100 will 'reduce' the fee to 1%, and if you keep increasing it, the fee % will keep dropping until an investment amount of $1250 (where $1 = 0.08%).

But I should also point out that while 2% or 1% may look bad on paper, a $1 fee isn't something you should really be fussing over. Of course it's great if you can afford to invest more every month, but sometimes it may not be possible or feasible.

Rather than looking at fees purely from a % basis, it's good to consider them in terms of absolute costs as well.

Hope this helps!

Regards,
thefrugalstudent

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