Hi! I was just wondering how the ongoing charges work. The Ishares gold etf it says the ongoing charge is 0.019% and on a 5k investment with 5% interest that would be £57 over 5 years. I am not sure how this charge is calculated and when exactly it is charged. If I was to only hold the etf for a month how much would I be charged and is this charge taken when I sell or buy the shares? Thanks for any help!
They are the fees taken by the etf provider at source and are deducted from the etf itself not your shares in it. So you pay it but indirectly ie it doesn’t come out of your FT account.
It is important to know what charges are applied so that you can judge if you are getting a good deal on fees or whether too much of your potential gains would be lost in fees.
Also worth noting for reference that Ongoing Charges displayed on most providers websites are estimations.
That’s not to suggest they are incorrect. They are not. But they are essentially a ‘best guess’ of future costs and depending on the specific product exclude all manner of other charges you’re probably paying without realising it.
The Ongoing Charge is however a nice little data point for comparison to other similar products. Fees eat profit so be aware of the charges.
If you’re scanning around and see ‘Transaction Costs’ my advice would be to ignore them. They muddy the water and are so illogical in there calculation it renders them almost useless and widely open to abuse.
If you’re investing in funds or investment trusts also worth noting Performance Fees. High watermarks are present in more ITs than you’d think. Some big providers are even charging 20% of the profits if a benchmark is outperformed. That’s good as it shows you’ve made profit. Whether 20% is ‘just’ is subjective. So be aware.
Nerd time over. Sorry. As you were.