Three Ways to Boost Your Investment Returns

Here's how to maximize your investment returns:

Cut Expenses

Every dollar spent managing your money is a dollar missed, not just from today's balance but from tomorrow's growth -- so cutting costs can have a major impact on your returns.

Say you invest $20,000 in an actively managed, no-load stock fund that earns the stock-market average of 11% per year for 10 years. A 1.5% expense ratio would force you to forgo nearly $8,000 in fees and lost earnings, leaving your investment worth $48,823 after a decade. Lower your expense ratio to 0.25% -- for example, by investing through an index fund -- and your costs would shrink to about $1,400, boosting the value of your investment in 10 years to $55,385.

The Securities and Exchange Commission has a calculator that enables you to compare funds and see how their expense ratios might affect your portfolio over time.

Spice Up Your Portfolio

In general, the more risk you're willing to take, the higher your returns will be over the long run. Goosing your stock allocation even a bit might help you amass a good deal more money over time.

Vanguard has charted 10 different asset allocation models for the period from 1926 through 2006. Here's some of what the company found:

With More Risk, More Reward Average returns for the period 1926-2006
Asset allocation	Average annual return	Best Year	Worst Year
50% stocks, 50% bonds	8.50%	32.30%	-22.50%
60% stocks, 40% bonds	8.90%	36.70%	-26.60%
70% stocks, 30% bonds	9.40%	41.10%	-30.7
80% stocks, 20% bonds	9.80%	45.4	-34.9
100% stocks	10.50%	54.20%	-43.10%
Source: Vanguard

The point isn't that a 100% stock portfolio is for everyone. Indeed, the all-stock portfolio lost 43.1% during its worst year (compared with a loss of just 8.1% for an all-bond portfolio's worst year) -- a collapse most investors in or approaching retirement couldn't afford.