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The key to better returns? Low fees

  • Mark Donnelly
  • July 16, 2018

Many people mistakenly think that improved investment performance only comes from clever investment managers choosing the right assets to invest in – they have the inside track knowing when and where to invest.

This is very rarely the case. In fact this type of investing, which is known as ‘active investing’, is often out performed by ‘passive investing’ which essentially tracks the overall market.

Most better performing portfolios have low fees

Active investing comes with higher charges and fees (than passive investing) which can be a significant drag on performance. Why is this? It simply comes down to less of your money and dividends from shares being reinvested – and over time this has a huge impact on cumulative returns.

Taking the example of a £100,000 pension. An annual fee of 3% means a charge of £3,000 – over 10 years that’s £30,000! However, importantly that means that money is not being re-invested for you – so your pension pot grows at a slower rate, meaning less money to live on in retirement.

Fees are the best predictor of returns

Indeed research by Morning Star in 2016 showed that the lowest fund costs were most likely to succeed with better outcomes for investors and funds with high costs tended to take greater risk in order to produce a competitive yield.

In addition, ‘active investing’ often tries to time the market and is less diversified which in the long term is a more risky approach and can diminish returns. Passive investing tracks the market and has proven over time to be the most effective way of growing wealth.

Brite have a clarity of purpose, focusing on long term pension performance by providing low fees and tracking the market. Whereas some overseas pension providers are more concerned with how much commission they can earn.

You can see the performance of our pension portfolios on the homepage of our website. If you’d like to discuss the performance of your UK pension and your current charges please contact us and one of our advisors will get in touch to help you.

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Regulation

Brite Advisors Pty Ltd. is licensed in Australia with the ASIC (AFSL 337670). The Brite Advisors SA (Pty) Ltd is registered with the FSCA in South Africa under FSP number 51690. In the UK, Brite Advisors (UK) is a trading style of Basi & Basi Financial Planning Ltd. which is authorised by the Financial Conduct Authority (FRN 513993). Brite Advisory Group also has numerous pensions schemes, administered in Hong Kong, UK, Gibraltar and Malta.

Brite Advisory Group has taken all reasonable steps & care in producing the information & statements issued on this website and accept no responsibility or liability for any errors, omissions or misstatements. Brite Advisors and its representatives have provided opinions, forecasts and recommendations based on information available at time of issue and hold the right to change their judgement and assumptions at any time and without notice.

There is always risk involved in purchasing financial products.

There is no guarantee of the future performance of financial products regardless of previous performance.

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