A recent report has highlighted that savers are losing significant sums of money by investing in active Funds, which are charging high investment management fees for them only to deliver investment returns with index-like performance.
The report reveals that half of the so-called active funds available are just copying an index; however index-like performance can be achieved cheaply by purchasing index trackers.
The difference on investment management fees on a £100,000 portfolio between an index tracking fund and an active fund could be as much as £1,200 per year more. Over a long investment time period, the difference in charges can have a dramatic effect on the overall performance of your portfolio.
So why pay those high Active Fund management fees?
There are some active managers out there who can demonstrate that their stock correlation is different from just following an index, and that they are active with stock selection and turnover of stock.
Those that can demonstrate a higher level of activity are statistically the funds that will produce better returns than the index.
So what should you do if you are invested in Active Funds?
You should check to see if the funds you are invested in are truly active funds and not just copying the index. If they are, this may justify paying the higher management fees but if not, you may consider switching to Index Tracking Funds which are significantly cheaper and will provide returns based upon the index they are tracking.
If you would like to discuss how your savings are invested or have any questions about any investments you hold, please do contact one of our consultants.