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How much does it cost to invest?

However you choose to invest, it's likely that you'll need to pay some sort of fee, whether that's an annual management charge, fees for selling or buying shares or withdrawal charges.

This article will explain the various costs and investing fees that come with investing so that you can avoid any nasty surprises.

What is an investing fee?

An investing fee is any charge that investors need to pay when investing money.

This can include things like broker fees, trading fees, management charges, performance related fees, aspect ratios, and various others.

Why do I need to pay investing fees?

The first and most obvious reason for being charged fees when investing is to pay for things like the ongoing management of your investments. With an actively managed fund, a fund manager will select where to invest in order to hopefully make the biggest returns - this person or company needs to be paid for their time.

When you buy or sell shares, you might need to pay what is essentially an admin fee for doing so.

Then there are fees to stop you taking certain actions. Such as the government withdrawal fee on lifetime ISAs, which is a charge you need to pay if you take money out for anything other than buying your first home.

Over time, ideally, the goal is to reduce fees where possible to gain the most out of your investments.

What type of costs are involved with investing?

There are many potential costs involved with investing but you're unlikely to be charged all of them! The amount you'll need to pay will depend on how you invest your money and which platforms you use.

The fees to look out for are:

    • ISA fees: If you invest with a stocks and shares ISA, your ISA provider may charge a fee for managing and administering your ISA. At OneFamily, we charge an annual management charge for our Stocks and Shares ISA, which is 1.1% of the value of your ISA.
    • Broker fees: These are the charges a broker receives for making trades on your behalf. Think of it as a service fee for managing your investment transactions.
    • Platform fees: The platform you choose to invest with may come with a charge to cover the cost of its technology and services.
    • Exit fees: Platforms tend to charge exit fees when you sell or transfer your investments.
    • Withdrawal fees: This is a fee you pay when you take money out of your investment account. It could be a flat fee or a percentage of the withdrawn amount.
    • Advisory fees: If you're receiving professional advice on your investments, advisory fees are charges for the guidance and recommendations provided by financial advisors.
    • Trading fees: Trading fees are incurred with each trade you make. This could be a flat fee per trade or a percentage of the transaction amount, depending on the broker or platform.
    • Penalty fees: These are charges designed to stop you doing certain things. Like breakage fees, which are a cost you need to pay to take money out of a fixed-term product before the fixed term ends.

How can I minimise my investment costs?

There are many different ways to reduce how much it costs to invest.

The easiest way is simply to choose an investment that requires less upkeep/management and therefore comes with fewer fees. For example, passive funds tend to have lower fees because the fund manager doesn't actively choose investments.

Here are a few other ways to minimise costs:

  • Avoid moving money around too often (due to the costs of buying and selling shares)
  • Look for low-cost indexes
  • Use no-fee brokers

It’s important to remember that taking risks when it comes to your finances doesn’t always pay off and it's always best not to invest any money that you're relying on for living expenses.

Do fees impact my investment?

Yes, investment fees eat into your investment returns. They take a cut from your profits, which impacts how much money you make through investing and the power of compound interest. Even if your investments don't make money, you will still likely need to pay some form of investment fees.

Therefore, it's important to choose your investments wisely and keep an eye on performance.

Elevate your investment knowledge with OneFamily

Thinking of learning more about investing? Well, you’ve come to the right place! Check out our Investing for Beginners guides for more key insights to get you started in investing.

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New to investing? Take a look at our beginners' guides

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