Fund Fees – 4 Tips To Help You Save. Many mutual fund companies charge investors high annual fees for managing their mutual funds. In case which actively managed funds, the cost of passive index funds is typically five to ten times the yearly cost. The performance of expensive products is correspondingly worse.
What consumers can do to reduce annual and further costs can be found in the following four tips for saving :
TIP 1: BUY ETFs
ETFs, i.e. exchange-traded index funds. These funds are not actively managed, but only track an index – for example, the German DAX stock index or the American S&P 500 index. At the same time, the investment companies usually do not pay any commission for the sale of ETFs. Result: The index funds are significantly cheaper than their actively managed counterparts. There are only issue surcharges with ETF savings plans when buying on the stock exchange; only a volume-dependent fee is due. And the running costs are often less than 0.5% per year. The downside: even if the prices are relatively low – there is also a lot of room for improvement with ETFs in terms of fee transparency. And there are also a variety of newly invented ETFs mapping unique indices.
TIP 2: BUY FROM DIRECT BANKS AND FUND BROKERS
You can turn to direct bank aid if you want an actively managed fund, to at least reduce the front-end load that is due on the purchase. Such direct banks do not have their own branch network, so customers usually conduct their business with the bank over the Internet. The banks pass on the resulting cost advantages, at least in part to consumers – for example, in the form of reduced or eliminated sales charges. Direct banks often also work with so-called fund brokers. These usually offer a wide range of investment funds with no sales charge. A little research when deciding for or against a bank can, therefore be worthwhile for consumers. Because: Even when it comes to buying ETFs on the stock exchange or via savings plans, direct banks usually offer better conditions.
TIP 3: NEGOTIATE THE SUBSCRIPTION FEE
If you buy active funds and don’t want to change your bank, you can at least try to negotiate with your own bank about the amount of the issue surcharge when buying funds. Particularly with more considerable investment sums, there may be a discount. However, this does not eliminate the high running costs of the funds.
TIP 4: DON’T CHANGE HORSES TOO OFTEN
Basically: Nobody should regularly change investment products – because often new fees are incurred when buying or selling a new investment. The withholding tax on capital gains is also due when a profitable investment is sold – and reduces the return achieved. Therefore: Even if the seller urges the bank to change a fund, nobody should be put under pressure.