Before you invest, you should take the time to understand all of the investment fees associated with your investment.
Any investment advisor worth working with should be willing to explain, in plain English, all the various types of investment fees that you will pay.
Acronyms are often thrown around with little understanding of what the terms stand for. Here are some of the main fees and associated terms you should know about.
AMC – Annual Management Charge
Fund managers and fee- based financial advisers apply an Annual Management Charge (AMC). This is deducted directly from the fund or clients portfolio to cover the ongoing management. This is taken to pay for their investment management services, such as research analysts and portfolio managers. And in the case of financial advisers, for generally managing your investment portfolio on an ongoing basis. The fees are applied as a percentage of total assets and are deducted directly from the fund. Usually on an annual or quarterly basis.
TER – Total Expense Ratio
For a better idea of the cost of your fund, you should look out for the total expense ratio (TER). The total expense ratio (TER) is a measure of the total costs associated with managing and operating an investment fund.
Unfortunately, investment fund companies are not obliged to reveal TERs and many will publish only the annual management fee, leaving investors with the mistaken impression that this is all they have to pay
The TER takes into account dealing costs, and auditors’ fees as well as the annual management charge. The listed figure for total expense ratios in ETFs and mutual funds includes a number of different types of costs. Much of the expense ratio often goes to the fund manager, which is charged with responsibility for managing the fund’s portfolio of investments. Other charges include, legal expenses, and accounting costs.
You will not be presented with a bill for expenses. Instead, they typically take an amount equal to the total expense ratio directly from the income that the fund’s assets generate. This has the net effect of reducing the amount of income available to shareholders.
OCF – Ongoing Charge Figure
A more realistic indication of the true annual cost is a measure called the Ongoing Charge Figure (OCF). This includes the AMC, as well as a number of additional costs such as trustee and auditor fees. Essentially this is an overall total annual charge for owning part of a fund and includes the transaction charges for the buying and selling of investments.
TER and OCF are very similar but the OCF includes performance fees and one off charges. The majority of funds must now provide a Key Investor Information Document to investors, which displays an ongoing charge figure rather than the total expense ratio, as part of European regulation.
Balancing investment and inflation risk – Why time in the market is key
There’s no proven way to time the market. Targeting the best days, moving to the side-lines to avoid the worst, or waiting for the market to ‘pick up before you invest. Missing only a brief period of strong returns can drastically impact overall performance.
Published On: September 16, 2022|3.7 min read|
The rise in popularity of ESG investing
ESG Investing (Sustainable Investing) is growing exponentially as more investors and issuers utilise ESG and climate data and tools to support investment decision-making.
Published On: March 10, 2021|4.8 min read|
Hedging and Currency Risk
Exchange rate movements impact returns when a change in the value of one currency against another currency leads to a rise or fall in the value of an asset. [...]
Get our latest financial blogs and articles straight to you inbox.
In partnership with
AES Financial Services Ltd which is Authorised and Regulated by the Financial Conduct Authority under registration number 464494. You can check this on the Financial Services Register at http://register.fca.org.uk. AES Financial Services Ltd (“AESFSL”), trading as AES International, is registered in England no. 06063185, its registered office being at 7 Bell Yard, London, WC2A 2JR