Ongoing charges and transaction cost

Help 👋
1

Hi i wanted to ask when and how are these charges collected from the ETFs that i have invested?
Would it be after i sell out and would that be collected from the original investment or would it be a separate invoice to pay?

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2

They’re rolled up into the ETF price, so nothing extra for you to pay.

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3

I see thanks! So the profit that is shown is pure profit when I sell?

Also is that the same with all the charges listed?

4

you won’t see any deductions from an ETF when you sell, those charges are built into the running of the fund.

just worth a note, the transaction costs listed are indicative, they are an estimate of what the transaction costs were not what they will be. costs vary slightly from year to year and it should get updated year to year of what the costs were.

stamp duty if applicable is paid by you

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5

No stamp duty on secondary ETF trades ( ie your purchase )

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6

I see so what does it mean when it shows this?

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7

Hello,

I also would like help understanding what “Ongoing charges and transaction costs” actually are and when they occur.

As far as I understand:

“Ongoing charges” - this is a charge that’s taken by EFT for their services (maintaining and keeping ETF holdings up to date). This is a per-year %, but I assume taken out daily internally by ETF.

  • Is this correct?

“Transactions costs” - :thinking:

  • when do these occur?? I’m really not sure about the transaction costs but would like to understand them.

Thank you!

8

Not sure if this helps, but i’ve taken this from Annual Costs and Charges statement that you can see on your account which gives the below information:

ETF and Investment Trust fees are deducted directly from a respective fund’s price on a daily basis and are not charged by Freetrade. These costs are reflected by a daily reduction in each of your ETF or Investment Trust holdings.

Ongoing costs are charged by providers for managing the product.

Transaction costs are incurred when a fund manager undertakes any transaction, e.g. in the course of rebalancing. (This is presumably buying and selling the investments in the fund)

(Incidental costs are performance fees charged by some fund managers when the fund exceeds a benchmark set by the fund.)

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9

My (novice) understanding is that the charges mentioned are a declaration of the Fund owners ‘cut’.

It is costs they deduct from operating profits and are always reflected in the price you buy or sell at.

I think FT should explain it bettwr than just offer a link to cost and charges, that i initially though i would personally be subjected to.

10

The previous two posts have pretty much explained it. But just to add. The transaction costs and ongoing charges listed in the available documentation are not forward looking. I.e they are the costs for the previous year for the fund. For ongoing charges this shouldn’t change much, fund’s generally set a set fee which is taken off as part of the fund (no interaction from you). The transaction costs though will fluctuate year on year, so the number you see is a number that’s calculated based on the year’s transactions. It could be higher or lower looking forward, but gives an indication.

It’s included because it’s mandatory. I’m not sure how useful knowing transaction costs actually are

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11

@Eden Thank you for this, it’s good to understand more about costs.

As for why it’s helpful to know the transactions costs:

I’ve noticed that transaction costs don’t seem to be included in the TER, and for some ETFs, the transaction costs seem relatively high, ultimately affecting overall ETF costs. So if TER is a comparison factor between ETFs it might matter.

For example, even in the screenshot posted earlier in the thread Ongoing charges and transaction cost - #6 by bhav you can see that “Transaction costs” are even a bit higher than “Ongoing charges” - which I think in this case makes ETF twice as expensive than it’s stated with TER percentage.

12

Aaahhh, interesting - that’s good to know thank you.

I thought that perhaps that occurs when I buy/sell ETF shares myself.

13

No these are only related to the fund manager buying and selling. The reason I mention about being unsure how useful it actually is is really just down to them being backwards looking. It might give an indication of how efficient they are. But as it’s never a reflection of what’s happening now and often changes more due to the economic environment, it doesn’t really give you a lot of information you can actually make use of.

It’s nice to know, but you’ll likely never use that information

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