Funds and investment trusts generally come with associated fees. Organizations and the people within them making investment decisions on your behalf require payment for their expertise. You should research the fees associated with differing funds and investment trusts.
The key thing to look out for is the ongoing charge. This comprises of a management fee covering the fund managers research and investment selection process as well as any admin fees. Whatever the rate of the ongoing charge the fees will always be taken directly out of the fund. That’s why the underlying value of your shares or units is always called the net asset value or NAV because the fees have already been subtracted. Performance fees which are only paid when a fund manager does well are also taken from the value of the fund.
There are also additional direct costs involved with investing that you should be aware of. A platform fee covers the online platform where you buy hold and sell your assets. Some are charged as flat fees while others subtract a percentage of the value of your investments.
Online platforms also make a charge when buying and selling and if these are investment trusts or individual companies a tax called stamp duty may also be applicable to purchases. And finally if you buy a fund directly through the fund manager rather than through a platform then entry and exit charges may also apply. The bottom line is check out the charges.
They all add up and over time can have a significant impact on your overall returns. If you want to learn more about investing sign it to our newsletter and subscribe to our YouTube channel.
