Active Fund Investment Management Do You REALLY Know the Costs?

Home Loans

Active Fund Investment Management Do You REALLY Know the Costs?
(presented by www.refinance-refinance.net - mortgage lenders)

By Ray�Prince

This article looks at a very important topic:

Investing for your future

The reason I say very important is that in our experience some investors have either limited knowledge on the subject or a lack of access to enough information to help with their decision making.

When dealing with clients’ money, we are very clear about the way in which we recommend they invest. This is based on a concept known as Modern Portfolio Theory, which uses passive not active funds.

NOTE: Passive funds do not employ the services of a fund manager, whereas active funds do.

Our clients are then rewarded by accepting the market return based on the risk they wish to take at a lower cost than many actively managed funds.

(Article continues below)

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When meeting new clients they are often not aware of the historical failure (in terms of consistent performance) of many actively managed funds and the associated high costs.

As costs are the one thing we can control, we would normally illustrate these costs and how they eat into the real return they could expect.

Let’s look a little further at these costs.

Ignoring trading costs for now (which is a cost based on how many shares the fund manager buys and sells in a year), below is an example of fixed costs of both passive and active funds.

James has existing investments made up of existing PEPs/ISAs/Unit Trusts totalling

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This entry was posted on Tuesday, October 24th, 2006 at 2:26 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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