Passive Investing With Index Trackers Should You Invest?

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 Passive Investing With Index Trackers Should You Invest?

Passive Investing With Index Trackers Should You Invest?

In particular index tracking funds and exchangeAbundance With Money Reviewtraded funds (ETF) have grown in popularity due to their low cost structures. This will certainly continue to be the case going into 2012 and 2013.

When markets are falling, as they were a year ago, investors tend to look for better value alternatives to their existing crop of relatively expensive funds.

To give you an idea of cost comparison a typical actively managed fund would charge 1.8% per annum on average in annual management costs. However this by no means tells the whole story. Many funds can charge over 2.5% per annum comfortably. Absolute return funds not only burden the investor with this weighty annual management charge but also reward their fund manager by way of a performance fee. Typical performance fees sit at around 20% of the gain in the fund over the expected, or targeted, benchmark. Nice work if you can get it.

On the other hand a typical index tracker would cost around 0.3% per annum, with some as low as 0.1%pa.When you find your investments are falling in value, or perhaps more importantly your funds are failing to deliver exciting returns that were possibly promised when you originally invested, you do start to wonder why you are paying for these extra costs.

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