How do I know if a fund is too expensive?
17 July 2025
Question by Lee
I’ve been looking at a few mutual funds and the fees seem to vary wildly. At what point is a fund just too expensive to bother with - and is the Ongoing Charges Figure the only thing I should look at?
Answered by Holly Mackay
I think it depends what you want. A simple collection of mainstream British or global shares is arguably not so hard to manage (OK, oversimplification BUT…) and there are decent Investment Trusts out there with costs around 0.5%.
F&C has been around since 1868, has a good track record and is well regarded and has an annual ongoing charge of 0.49%. You can also of course just mirror an index of large global shares for nearer 0.1% - such as the Fidelity Index Word fund (0.12%) or the iShares Core MSCI World (0.2%).
If you start to get funkier or look at less liquid or more complex regions, or sectors, understandably the management charges will be more. So the Baillie Gifford China Growth Trust charges 0.97%. It’s a less easy market to operate in than the US for example, it’s an actively managed trust so you’re paying for manager to cherry pick the best, and you also are paying to access some privately-held companies.
I think there are some products worth paying a bit more for, but you have to be convinced that it’s worth the premium. I think less confident investors can always start with a few low-cost passive options (which will be a lot cheaper) and maybe pick a few more expensive active products as you gain confidence. This approach is known as a core and satellite approach and works for many.
As for disclosure, you will drive yourself mad if you dig too far into transaction costs, and fees for this and fees for that, so I do think the Ongoing Charges Figure (OCF) is a decent comparator. If you look at funkier stuff like private markets or infrastructure, for example, then you should also consider transaction costs or also any performance costs. But for bog standard stuff, the OCF is fine.
Hope this helps!
