Reducing the Cost of Investing?
I understand that the costs for investing are reducing, is that correct and how can this help me?
First of all, it depends on many factors. Let’s consider that if you invested £100,000 today with say a 5% annual return paying 1% in annual fees, you would end up with approximately £320,000 in 30 years, but only £240,000 if you paid 2% in annual fees. If you’re concerned about your investment savings, don’t fall into the trap of focusing only on your investment gains. By keeping fees down can be just as important to getting ahead in the long term.
To better understand the fees of an investment portfolio or a fund you need to look for the Total Expense Ratio. In many cases the investment manager will quote a management fee which can range from 0.22% to 1.75%, however be careful to request the underlying fund fees which in themselves can range from nil to 1.50%.
The good news is that investment fees continue to decline.
Technology is very much behind this decline where we at SaSo are able to invite investment managers and funds to manage money through an investment platform. The investment managers do not incur the same costs as holding the assets direct and so our clients can benefit not only from competitive pricing but from the most up to date technology and quality reporting.
There are obviously other elements to a successful investing strategy, including a broad asset allocation and the discipline to save consistently. But keeping your expenses down is one of the simplest and most effective ways to ensure a successful investment strategy. By reviewing more cost-effective investment options is also one of the few things investors can control in a market that always tends to be full of uncertainty.
If you focus on things you can control like fees, then the things you can’t control are going to have less of an impact.
About the Author
John Leonard, Head of Business Development
Tel: 01534 488773 • Mobile: 07797 742811
John Leonard is responsible for our Private Clients based in Jersey. John recently joined SaSo Strategic Advisers in August 2017 having spent the previous 7 years in an established financial services business where he was responsible for providing advice to both private and corporate clients in all areas of financial planning.