Investing stories that caught my eye this week.
Where’s your fee-phobic passive investing co-blogger when you need him? That’s what I thought as I read an expose [1] of hidden fees in the Financial Times on Monday.1 [2]
In conjunction with the similarly cost conscious Lang Cat consultancy, the FT has totted up the hidden fees on a variety of popular funds, as revealed by the new Mifid II trading regulations.
Mifid II requires funds to go beyond the ongoing charge figure [3] (OCF). They must now also give a total cost, including transaction and trading costs and other charges.
The FT reports:
“…many investors pay almost double the OCF in the UK’s most popular funds once transaction costs are included.
This can go up to four times OCF if platform charges and performance fees are included.”
As you’d expect, some active funds don’t fare well under this particular shaft of sunlight.
For instance the FT highlights the Janus Henderson UK Absolute Return fund, which has an OCF of 1.06%, as well as transaction costs of 0.79%. If platform fees (via Hargreaves Lansdown [4]) and a performance fee is added on, the total annual cost rises to an average of 3.82%.
But tracker funds have also found the receipt to extra charges down the back of their sofa. For example the BlackRock iShares FTSE UK All Stocks Gilt tracker fund has an OCF of 0.2%. With platform fees and transaction costs the cost rises to 0.75%.
Few Monevator readers should be shocked by the platform fee component of the analysis – our broker comparison table [5] has long highlighted that particular burden of investing.
But transaction fees and similar data have been much harder to come by.
As Lang Cat director Mike Barrett says:
“It is grimy that it has taken some EU regulation for asset managers to tell investors what the true cost of investing is…
You have always been paying these fees, but now the fund groups have the good grace to tell you these costs upfront.”
Separately [6], Andy Agathangelou of lobby group The Transparency Task Force has written to the head of the Investment Association demanding an apology for a previous report from the latter that had claimed hidden fees were the “Loch Ness Monster of investments”.
Further reading:
- “There’s a strangely bittersweet feeling at seeing these figures finally revealed in black and white.” – The Evidence-based Investor [7]
- Hidden investing costs revealed — but ‘still hard to find’ [Search result] – FT [8]
- Vanguard has (now) produced a commendably clear charge sheet [PDF] – Vanguard [9]
- Mifid II and you – Monevator [10]
From Monevator
Bonds are for pessimists, shares are for optimists – Monevator [11]
From the archive-ator: Cash and bonds are different investments – Monevator [12]
News
Note: Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber.2 [13]
Disposable income is rising in real terms – ThisIsMoney [14]
Buy-to-let sales billions spur capital gains tax bonanza [Search result] – FT [15]
Ghost towers: half of new-build luxury London flats fail to sell – Guardian [16]
Want to sell your luxury London home? Then take £1m off – Guardian [17]
Landmark leasehold case fails to slash extension costs – Guardian [18]
Are bond fund investors heading for a bear market? [Search result] – FT [19]
Seven in 10 UK workers are ‘chronically broke’, study finds – Guardian [20]
[21](Click to enlarge)
Seems the Lambo and/or Rari in the garage is just the icing on the cake – Visual Capitalist [22]
Products and services
Virgin Money now has Best Buy easy access ISA paying 1.21% –ThisIsMoney [23]
Interactive Investor customers unable to trade on new website – Telegraph [24]
Customers urged not to switch supply after Future Energy collapse – Guardian [25]
How one eBay seller makes £36,000 a year trading car parts – Telegraph [26]
Think you can spot scammers? Try this interactive test – Guardian [27]
Why investors can’t get enough of Terry Smith’s Fundsmith – ThisIsMoney [28]
The cheap tracker funds that aim to mimic Warren Buffett – Telegraph [29]
Comment and opinion
Ask the Spud: Should I use dollar-cost averaging? – Canadian Couch Potato [30]
The UK doesn’t look expensive versus its long-term CAPE ratio [Interactive Tool] – Barclays [31]
Things to do before you invest if you don’t want to lose everything – Financial Samurai [32]
Morgan Housel: What other industries teach us about investing [Video] – YouTube [33]
Howard Marks’ latest memo – Oaktree Capital [34]
Robert Shiller: The US is the world’s priciest stock market… – Project Syndicate [35]
…but momentum indicators suggest the bull run could continue… – The Reformed Broker [36]
…and it’s expensive US stocks people are buying, while shunning value – Bloomberg [37]
Success by exhaustion – Of Dollars and Data [38]
2017 investment lessons for stock pickers [PDF] – UK Value Investor [39]
Supermarket giants doomed? No, just history repeating – The Value Perspective [40]
Crypto corner
How and where to buy crypto while avoiding the frauds and scams – ThisIsMoney [41]
Disruptive US trading app Robin Hood is to bring free trading to crypto – CNBC [42]
50 Cent forgot he had a stash of Bitcoin now worth $8m – BBC [43]
Off our beat
IKEA: 22 secrets you didn’t know [Where the loose bit went is not revealed] – ThisIsMoney [44]
Some lessons for living from older generations – A Wealth of Common Sense [45]
DIY podcasting isn’t as cheap as you think – Quartz [46]
And finally…
“Investors that panic and follow the herd are unlikely to succeed. It’s a recipe for failure. The world isn’t going to end. This baby isn’t going down, and this ship isn’t coming apart. You must be on board in order to reach your destination.”
– Frank Armstrong, Harriman’s New Book of Investing Rules [47]
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- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [53]]