Many individuals think buying a home will be their biggest expense, but the fees you pay on your investments could top what you need for a deposit on a house. 20 years of fund fees can cost the average British saver almost seven times the amount they need for a house deposit.
With an investment of £147,000 (the wealth of the average Brit according to 2014 research) you could be paying £57,669.20 in fund costs.1 By contrast, according to Money Saving Expert, the average deposit on a UK house is £8,500.
By swapping mutual funds for exchange-traded funds the average Brit could see this cost drop to a much more manageable £9,874.86 over a 20-year period.
Time to pay attention to investment costs
The cost to buy a home is well documented in the UK, many despair at the level of deposit potential home buyers now need. But that deposit could be achieved by lowering the cost of an investment and this issue is largely overlooked.
Savers need to be looking at the costs they are paying to ensure they are maximising their wealth. The introduction of exchange-traded funds means that it is no longer necessary to pay these high fund costs.
It is not just the fund cost that could be eroding your wealth. Earlier this month we looked at the costs individuals are paying and many are being overcharged for investing.
Lower cost options available to investors
There is light at the end of the tunnel for UK savers. Digital wealth managers, such as Moneyfarm, are making the investment management industry more accessible. Easy to use, digital interfaces are combined with strong asset allocation to create industry beating returns for the average investor, all at a low cost.
1 Morningstar data suggests the average mutual fund charges 1.46%, this calculation has been done assuming 3% returns per year.