Research reveals tumbling fund fees

There’s good news for investors, after a recent survey revealed that average charges on European funds are now lower than they have ever been.

The findings of the fund research and rating firm Morningstar show that the largest benefits are evident in funds with a focus on environmental, social and governance issues.

There are various reasons for the reductions. One is pressure on the industry from investors who have been moving their money from active funds where managers buy and sell shares they believe will perform well. These managers must perform well to justify their fees.

In many cases, investors have been switching to passive funds, which follow the moves in certain indices or sectors. They don’t involve much trading, and therefore have lower costs. The growth in passive investing has led to a reduction in their charges, and this fall has forced active funds to follow. This means both types have gradually become cheaper.

Although the actual reduction is small, charges are generally applied as a percentage of the sum invested. Any cut in costs can be significant, as it compounds over the years, so a small saving now can amount to a worthwhile amount over a long-term period.

While fees are a consideration when choosing an investment, it shouldn’t be the only aspect that drives the decision. Risk, past performance and geographical exposure are among the other aspects that can have an impact, and unbiased financial advice in Chester or elsewhere should be consulted if you are unsure of the most appropriate investment for your funds.

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