“Unprecedented” is the word most commonly used to describe 2020. Many people will be glad when it ends, and as the year draws to a close, we can expect to see the usual lists of investment winners and losers in the media.
Typically, these tables will name shares that have risen most, funds that have performed well relative to their peers, and the countries that have fared best against a tricky economic background.
One of the factors that has an impact on investment returns is the level of fees managers charge for running a fund. That’s the source of a great deal of debate, as performance can be eroded by higher charges.
One area of contention is whether it’s worth paying for active investment management – where a financial advisor makes recommendations – rather than simply allocating money in a way that matches movements in a particular stock market, a so-called tracker fund. Trackers have the advantage of lower charges and there is some evidence that those reduced costs mean a tracker can perform better than the average active fund, after charges.
However, that’s not the best comparison. Talking about averages automatically creates distortion. There can be a huge spread between the top and bottom of performance tables.
A closer look shows that the best active funds deliver performance that is well ahead of a tracker, even allowing for fees. Identifying the best active fund will result in much stronger returns, and that’s something we at Hartey Wealth Management can help with if you’re seeking investment advice in Chester.