by Scott Ronalds

Some people love shopping at Costco, others hate it. I fall more into the latter camp. Crowds, lineups, and parking battles aren’t my thing. But two things keep bringing me back: the unbeatable prices, and the hot dog.

That fresh, soft bun and seasoned-just-right sausage is an absolute steal at just a buck fifty (not to mention it comes with a drink). Sure, it’s far from a healthy nosh, but after you’ve logged a few thousand steps in a colossal warehouse you deserve a salty snack.

Costco has been dishing up the meat in a bun combo for nearly 40 years. Remarkably, the price hasn’t changed. Surely, it’s part of the reason why Americans ate more than 200 million of them last year, according to an article in The Economist on why Costco is so loved.

The piece addresses the reasons for the big-box retailer’s enduring appeal — among customers and investors — including its focus on stocking quality products at the lowest prices, incredible buying power, high return on capital, and 90%+ membership renewal rates. It’s for these reasons, too, that Steadyhand clients own a piece of the company (through our stock holding in the Equity Fund and in turn, the Founders Fund and Builders Fund).

But back to the dog. Because the price of Costco’s iconic red hot combo has remained unchanged, its “real” cost falls every year when factoring in inflation — making it the epitome of a good deal that only gets better over time. We take the concept to heart with our fee structure.

Our Fee Reduction Program rewards commitment and loyalty: as your portfolio grows and your relationship with us matures, your fee (as a percentage of total assets invested) goes down, enhancing the value of your investment. All portfolios over $100,000 qualify for a reduced fee, which is lowered even further after you’ve been a client for five years (and lowered again after 10 years). Check out our Fee Calculator to see the fees on any given portfolio.

Here’s an example of how the program works.

• Initial investment: Let’s say you opened an account with us 10 years ago for $100,000 and held our Founders Fund. Your initial all-in fee would have been 1.34%. 
• Year 1: If your investment grew by 7%, to $107,000 (the fund’s actual return in 2014 was 7.1%), your fee would have fallen to 1.32%. 
• Year 5: Fast forward four more years, with your portfolio now at $200,000 from a combination of investment returns and contributions. At this milestone, your fee would have dropped to 1.12%, reflecting the growth of your portfolio and your first tenure discount of 7% (applied annually hereafter to your total fee). 
• Year 10: Jump ahead another five years and assume your portfolio has grown to $400,000. Your fee would now be 0.94%. This is thanks to the size of your account and a tenure discount of 14% after a decade of partnership with us.

Our structure is counter to the industry standard where fees typically remain static, meaning that as your portfolio grows, so does your investment firm’s take — not a great value proposition in our view. Perhaps a trip to the Costco concession is in order for the industry’s fee setters.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.