Keep an eye on fund charges

If you invest in managed funds (such as unit trusts) your main concern is likely to be the overall performance of your investment. However, the unit price is only half the story. The charges that your fund managers levy will have a significant impact on your returns. Here is a quick summary of the charges that a typical fund will levy:

  • An annual management charge, which on average is 0.85% for an actively managed fund.
  • The cost of transactions – in other words the buying and selling of different assets including trading fees, commissions and stamp duty reserve tax. The last study available into this indicates costs of around 1.8%.

As an investor in a unit trust or other managed fund you could easily be losing 2.5% a year in costs. It is for this reason that so many investors choose to invest in the stock market.