Understanding investment fees

NAV TL;DR

If you don’t have time to read through the whole article, you can check out our short version below:

When you enjoy your daily cuppa, you know there are costs for:

How much we value the raw materials, craftsmanship, sales experience or quality of services determines how much we are willing to pay.

When it comes to investing, costs include:

These costs are sometimes unseen by investor.

While fees and charges are inevitable in investing, knowing what they cover can be helpful in understanding what value you get for the money you pay.

Common Fees in Investing

Upfront Fees

Fees incurred at the time of purchasing a product a.k.a sales charge for Unit Trusts; commission or brokerage fee for Equities.

These cover the costs of:

When minimum sales charges are imposed, it is more costly to do many small transactions, rather than a larger, single transaction.

If amalgamation is offered, all trades performed during the day are totalled up so you save on minimum charges for each trade.

Management Fees

Charged by fund managers for administering and managing a fund.

These cover the costs of:

Custody Fees

Charged for holding and administrating your assets, such as stocks.

In the past, these were physical custody papers that required safekeeping.
Now, this has been digitised but still requires the services of a custodian.

Examples of custody services are dividend entitlement, a corporate event notification and regulatory reporting.

A further breakdown of investment costs and how they can affect your returns can be found here:

• What are the costs of investing in equities?
• Costs of investing in Exchange-Traded Funds
• Costs of investing in Unit Trusts

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