What is the 'Real Deal'? Investment Costs
Having a look upon the business endeavors, we get to know that in order to increase profits; people invest their money, their time and all the skills that they have got. However, in the end, no body looks at the efforts they have made; instead it is the profit level that they earn that brings their company or organization the real worth in the market.
Investing in stocks is another high yield option. Technically speaking, a preferred stock is an equity investment which is sensitive to interest rate. In preferred stocks, dividends are paid at a fixed rate. It is due to this feature that a lot of investors are attracted to it.
If you have an adviser, make sure you ask them what the Portfolio Turnover Rate is on your funds. So, how can you find out about these extra costs? Well, they are in the fund's prospectus, and will show for the previous year what percentage of fund assets were traded. The FSA estimates that a 100% fund turnover in an equity fund in a year would cost the fund around 1.8 per cent. However, on a Fixed interest fund, costs tend to be much lower. Latest calculations from Financial Express Data has shown that the average UK Equity fund to February 2009 showed a figure of 95% fund turnover, meaning that these trading costs would add circa 1.7% to the annual costs of the funds. It should be noted that in some markets, such as Emerging or Far East funds for example, the PTR rate can add much higher costs than this, even as high as 9%. So why are these costs so important to know about? Very simply they bring 'performance drag' to the way your money grows. Let's add these costs up: AMC - 1.5% TER - 0.2% (say) PTR - 1.7% Total - 3.4% pa So, your fund will have to perform at 3.4% pa to even stand still! That is one of the main reasons why there has been a lot more interest in index and passive funds, which have much lower PTRs, and usually lower costs generally.
So how would the costs look on a typical passive equity portfolio? We presume here that you would like guidance and advice on your investments, and use a fee based wealth manager & planner who will look at all your requirements, and have 150,000 to invest or transfer. You might expect that this would be at least the same in costs,if not more? Well, they should look something like this: AMC - 0.4% TER - 0.2% (say) Admin - 0.55% PTR - 0.2% Fee - 1.0% (financial Planner) Total - 2.35% pa As you can see, this service should work out with less costs, but deliver far far more to you, the client. As mentioned in previous articles, this includes advice such as why not spend more or pay off debt etc. When you perhaps read other articles on investing, costs are mentioned, but the greatest emphasis is on performance. You will see adverts in the press no doubt boasting of the last 12 months performance, or that they were 'top quartile' for the last two years.
Avoiding scam is necessary, as investing your money would only bring you loss of your principal investment. If you want to invest in some real sector, research about the credibility of the company that would be investing your money. Second important point is the past performance of the company.
Before investing in a closed end fund keep in mind that not all closed end funds are structured to pay income, and some can distribute principal as part of their monthly or quarterly distributions. Do the research carefully if your heart is set upon buying them, do so when they are selling at a discount. - 23208
Investing in stocks is another high yield option. Technically speaking, a preferred stock is an equity investment which is sensitive to interest rate. In preferred stocks, dividends are paid at a fixed rate. It is due to this feature that a lot of investors are attracted to it.
If you have an adviser, make sure you ask them what the Portfolio Turnover Rate is on your funds. So, how can you find out about these extra costs? Well, they are in the fund's prospectus, and will show for the previous year what percentage of fund assets were traded. The FSA estimates that a 100% fund turnover in an equity fund in a year would cost the fund around 1.8 per cent. However, on a Fixed interest fund, costs tend to be much lower. Latest calculations from Financial Express Data has shown that the average UK Equity fund to February 2009 showed a figure of 95% fund turnover, meaning that these trading costs would add circa 1.7% to the annual costs of the funds. It should be noted that in some markets, such as Emerging or Far East funds for example, the PTR rate can add much higher costs than this, even as high as 9%. So why are these costs so important to know about? Very simply they bring 'performance drag' to the way your money grows. Let's add these costs up: AMC - 1.5% TER - 0.2% (say) PTR - 1.7% Total - 3.4% pa So, your fund will have to perform at 3.4% pa to even stand still! That is one of the main reasons why there has been a lot more interest in index and passive funds, which have much lower PTRs, and usually lower costs generally.
So how would the costs look on a typical passive equity portfolio? We presume here that you would like guidance and advice on your investments, and use a fee based wealth manager & planner who will look at all your requirements, and have 150,000 to invest or transfer. You might expect that this would be at least the same in costs,if not more? Well, they should look something like this: AMC - 0.4% TER - 0.2% (say) Admin - 0.55% PTR - 0.2% Fee - 1.0% (financial Planner) Total - 2.35% pa As you can see, this service should work out with less costs, but deliver far far more to you, the client. As mentioned in previous articles, this includes advice such as why not spend more or pay off debt etc. When you perhaps read other articles on investing, costs are mentioned, but the greatest emphasis is on performance. You will see adverts in the press no doubt boasting of the last 12 months performance, or that they were 'top quartile' for the last two years.
Avoiding scam is necessary, as investing your money would only bring you loss of your principal investment. If you want to invest in some real sector, research about the credibility of the company that would be investing your money. Second important point is the past performance of the company.
Before investing in a closed end fund keep in mind that not all closed end funds are structured to pay income, and some can distribute principal as part of their monthly or quarterly distributions. Do the research carefully if your heart is set upon buying them, do so when they are selling at a discount. - 23208
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