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Of Course Costs Matter

Controlling costs is one of the most important ways investors can help tilt the investment pitch in their favour

Christopher J. Traulsen, CFA 26 October, 2010 | 4:03PM
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The BBC show Panorama recently aired a piece on how much money Britons lose to costs from their pension savings over time.

The show’s message was no surprise to us at Morningstar as we have ample evidence that controlling costs is one of the most important ways investors can help tilt the investment pitch in their favour. Indeed, that’s the reason our qualitative analysis process focusses on ongoing charges as one of the five key factors we examine in assigning forward looking ratings to funds.

The impact of costs is clear—one of our studies in the US showed that the average fund in the lowest cost quintile for domestic equity offerings had more than 2.5 times the odds of beating its peers through time than that in the most expensive quintile.

Continue reading this blog at FTAdviser.com.

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

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.