Informed Choice chartered financial planner Martin Bamford was quoted in the Sunday Times this weekend, in an article about cutting fund charges when making ISA investments.
With the end of the tax year rapidly approaching, many investors will be considering how they invest their 2011/12 ISA allowance.
The cost of investing has come under increasing scrutiny, particularly in respect of any ‘undisclosed’ costs associated with fund management which create a drag on performance.
All investors should always understand what they pay in respect of fund charges, administration and advice. These are the three main components of an annual management charge levied on an investment fund.
From a typical 1.5% annual management charge, we would expect to see the fund manager charge 0.75%, the administration platform 0.25% and the adviser 0.5%.
Request your free copy of The ISA Guide – available for immediate download
[wp_email_capture_form]With tracker funds, the annual management charge is typically much lower but does not include any element of charging for administration or advice.
Within the Sunday Times article, Martin commented on one of the most expensive options for ISA investors, a multi-manager fund.
“The Jupiter Merlin Worldwide Portfolio has a TER of 2.53%. Funds investing in overseas equities and property are likely to be more expensive than those investing in UK equities and fixed interest securities.”
Charges are an important consideration when making ISA investment decisions, but they are only one aspect that investors should consider.
ISA investors can keep investment charges low by sticking to simple investment sectors, using passive funds (such as Exchange Traded Funds) where suitable, and understanding what they are paying for different aspects of the investment service.
Our free ISA Guide is available for immediate download as a PDF. Your email address will be added to the distribution list for our weekly email newsletter – Best Advice. You can unsubscribe at any time by clicking the unsubscribe link in this newsletter.
Photo credit: Flickr/dnnya17
