Investing in funds is a great way to spread risk and buy into a diverse range of investments covering a region or sector, without having to manage each individual investment — your fund manager does that for you. When we talk about ‘funds’, we’re talking about unit trusts and OEICs (open-ended investment companies). Many of us have pensions which invest in funds, so you need to make sure you know what you’re being charged.

Dealing commission / account fees

When you buy or sell shares in a fund, your broker will charge you dealing commission, similar to buying other investments. Here at The Share Centre, it costs from £7.50 per deal, but you can avoid this charge if you invest in one of our Ready-made ISAs, which contain our funds of funds, enabling you to choose from three funds, dependant on your attitude to risk. They don’t have a monthly account fee either, whereas our Share Account has a small administration fee.

Ongoing charge figure (OCF)

In order to cover the running costs of a fund and make a profit, fund managers charge an annual management charge (AMC). In general, the funds which invest in riskier assets will charge a higher AMC. Although the AMC makes up the bulk of a fund’s charges, the ongoing charge figure (OCF) is a better way to compare annual costs since it also includes any trustee and auditor fees which are taken directly out of the fund.

Initial charge

Although they are becoming less common, some brokers will still charge you an initial ‘entry’ fee when you first buy a fund. We won’t.

It’s only natural to focus on the performance of your investments, however the charges you pay can have a significant impact on your returns, eating into your profits. Charges can vary between funds and brokers, so be sure to read funds’ key investor information documents (KIID) and study brokers’ tariffs. When it comes to choosing, we’ve got everything you need to find funds which are right for you.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.