By ROBIN POWELL
Overpaying for anything is a bad idea. But that's especially the case with investing. Paying unnecessary fees and charges could reduce your eventual returns by a third or more.
Expressed as percentages, asset management fees seem small. But compounded over decades of investing, they can make a huge difference.
Remember too that the annual management charge is just part of what you pay. You also need to factor in the cost of trading by your fund manager; and if you're using an actively managed fund, the manager could be trading very frequently.
Bear in mind as well that, if you're investing via a retail investment platform, you will also be paying a platform charge.
So, all told, you might be paying far more in total than you thought you were. That's not to say that you should automatically go for the cheapest option. But as a predictor of future returns, cost is remarkably reliable; in other words, the less you pay to invest, the higher your net returns are likely to be.
The danger of overpaying to invest is explored in Part 5 of How to Invest, a new video series that my Regis Media colleagues and I have produced for Wealth Matters, a financial planning firm based in the Home Counties of England.
If you find these videos helpful, please do share them with others.
Picture: Didi Miam via Unsplash
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