Buying funds is made easily possible via the use of an online stockbroker. An investor should always check to see whether the desired broker is approved by the Financial Conduct Authority. Besides this, there are a number of key considerations when buying funds through a broker:
Brokers will typically charge an administration fee of 0.2-0.4% per year on the value of holdings. While some brokers include all costs within this fee, some brokers charge separate fees for a different element. For example, some may charge for an ISA account administration, some may charge for asset transfers and so forth. It is important to select a broker which matches the needs of an investor, failure to do so could see an investor pay hundreds if not thousands of pounds more.
The fund itself will also have a yearly charge of around 0.95%.
There are thousands of funds available to invest in. To make the job of choosing a fund a little easier, some brokers include a list of funds that they believe are superior to others in the market. While these lists can be useful in terms of spotting opportunities, investors should not treat these lists as advice and make a decision that they themselves are comfortable with.
Like shares, a fund can be held in an ISA or SIPP or a regular fund account. Experts recommend for investors to fully utilise their ISA allowance when investing in funds as there is no capital gains tax liable if funds are held within an ISA account or ‘wrapper’.