Fund Price Versus Performance

Price is an important factor when selecting fund investments, but it's not the be-all and end-all

Emma Wall 15 August, 2014 | 10:00AM
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The investment industry has taken a battering over the last couple of years, accused of being too expensive for the masses. Some of this downward price pressure is positive – financial advisers are now regulated to ensure complete cost transparency, while other measures have had a mixed response – such as the restrictive price cap recently introduced on pension funds.

Retail-investor fund charges have also been put under the spotlight. In response, there has been a significant rise in popularity of passive investments, i.e. those investments that follow pre-set investment rules rather than being actively managed by an individual or team of analysts--and therefore typically charge a lower fee, as well as new interest in actively-managed, low-cost passive strategies. 

Yet it's worth remembering that even passive strategies require an element of active decision-making and such asset allocation can hold just as many challenges as stock picking within actively managed funds. Thus, though the lower the price the less it will eat into the investor's returns, price should not be the only factor to consider when choosing an investment.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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