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Costs

Costs are an important consideration when investing.  The greater the costs, the harder your investments have to work to deliver you a return.  There are a number of different types of costs you might incur depending on how you choose to buy investment companies.

Financial advice

If you choose to take financial advice, you will need to pay the adviser for their services.  Though this can be quite expensive, it could end up saving you a lot of money in the future.

There have been big changes to the way in which financial advisers can be paid, and advisers are no longer allowed to receive commission from the products they recommend.

Find out more about how financial advisers are paid

Dealing costs

There are three main dealing costs you may incur:

  • Brokerage
    You buy investment company shares through the stock market using a broker, perhaps online or over the telephone.  Charges for these services will vary, and could be a fixed fee or a percentage of the cost of the transaction.  Many online brokers allow you to deal in investment company shares for less than £15 per transaction and can be very cost effective.
  • Dealing spread
    The dealing spread is the difference between the price you can buy and sell investment company shares for.  The bigger the spread, the more the price has to rise for you to make a profit.

  • Stamp duty
    If you buy shares in UK based investment companies, you will normally have to pay 0.5% stamp duty on the value of the shares.  There is normally no stamp duty on overseas based investment companies.  There is no stamp duty on the sale of shares.

Wrapper scheme costs

If you hold your shares through a wrapper scheme, such as an ISA, there may be costs to provide this wrapper and for holding the shares.  These costs will be set out in the literature you will receive from the wrapper provider.

Find out about the costs of investment company wrapper schemes

Costs of running the investment company

You can find out about all the costs incurred by an investment company in its annual accounts.

One of biggest costs is the fees that the investment company will pay to its fund managers for managing the portfolio.  It may also pay a performance fee if the manager outperforms certain targets.  You can find details of the management fee, and any performance fee, of all AIC members on this site.

To help you compare investment companies, the AIC also shows ‘Ongoing charges’ for all its members, which is a measure of the regular running costs of an investment company, expressed as a percentage.  We also show a separate figure for ‘Ongoing charges plus performance fees’.