As I mentioned in a previous post, I’m new to investing . I currently have a DYI portfolio with 9 ETFs (mix of equity & bonds). When calculating the cost of the portfolio do you just add the TER of each ETF? I know I should try to keep costs to a minimum, but what is an acceptable cost % for a portfolio?
Thanks in advance
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You won’t see the fees as such as the fund will include in price but how much you pay can be calculated from how much you have in each ETF and averaged out against the TER for each ETF.
In really simplistic terms - if you have £5,000 in a fund with an ongoing fee of 0.3%, and the another £5,000 in a fund with a fee of 0.1% - Then the amount that you will have paid in fees would be 0.2% of £10,000 (£20)
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On another forum I’m on, 0.25% is often used as the threshold between cheap and expensive for the fund TER. To get below it, it probably needs to be a big fund on a popular index (e.g. S&P500 available below 0.1%), so the more specialist sector funds tend to be in the ‘expensive’ range. Seriously question anything over 1%.
I’ve seen a lot of people saying that 0.5% is their maximum for a fund cost as a rule. This is also the highest cost ETF I have (an emerging fund) but I’d consider slightly higher if it was what I wanted.
I think we need to be careful about overly thinking costs and letting them cloud our judgment about the most appropriate funds. One of the advantages index trackers are sold on is their reduced costs vs the actively tracked funds, when it used to be 5% for a fund manager. The difference between a 0.25% and a 0.5% is not the same scale though. Having said that two identical funds one 0.25% and one 0.30%, I know which one I’m taking.