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How to cut the cost of investing

 Whilst the global economic outlook remains under very close scrutiny and the scarcity of investment returns continues, what can the investor do to maximise their chances to achieving good and sustainable Net returns?

Here are some basic tips that will allow the investor to enhance their Net returns from investment with reductions in the cost of investing and better tax efficiencies. These points are not to be relied upon by the reader as investment advice will be required before any decisions can be taken.

A few simple points to review:

  1.  Understand the effects of investment and advisory charges – studies undertaken by passive asset management firms have shown that if the total expenses per annum for investing are at 70 bps (at 0.7%) over 20 years then the investor keeps 80% of the returns after charges. If the total expenses run at 200 bps (or 2%) the investor keeps only 65% of their returns after charges
  2. Heed the principle that 90% of the returns produced from an investment portfolio over time derive from simple asset allocation decisions and not from the stock/fund picking skills of the fund manager
  3. Use Passive investment strategies whilst using an overlaying asset allocation model – this will help considerably towards managing the effects shown in point one above. You may be advised to use instead Investment Trusts or Exchanged Traded Funds (ETFs) whilst in turn understanding that these have their own risks which may include gearing, use of derivatives
  4. With 2013 now to be the year of the implementation of financial services RDR, understand the fees that your IFA or stockbroker overlay on the portfolio – what is their investment proposition and are you getting value from this? Due to the RDR these fees are likely to vary quite noticeably between firms so you no longer need to accept the norm
  5. Get the tax right – understand how your investment asset is taxed as by holding the asset in the right vehicle you may be able to enhance your net returns quite simply
  6. Manage your assets against the further depleting risks that Inflation presents. Often this can involve investment in assets that link to the rate of inflation or more generally investment in “real assets” such as equities
  7. So, you ought to be able to enhance your Net returns by merely managing – charges, tax and inflation risks.




Team Pioneer

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