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The active vs passive investment debate has divided the investment world for years, with proponents for each side regularly arguing the pros and cons of one versus the other.
For those new to investing, here is a brief description of each:
Passive investments will match an index like the S&P 500 or the FTSE 100 – investing in them like for like. They are generally automated, with some oversight from a human, and usually quite cheap to buy.
Active investments are funds run by investment managers who don’t try to match an index – they try to beat it by selecting investments they think are best based on their own research. They tend to be more expensive as you are paying someone for this extra research and management.
At FundCalibre, we are clear fans of the active approach. But we acknowledge that not all actively-managed funds are good and even the best fund managers will have an ‘off’ spell.
That’s why our proprietary screening tool AlphaQuest strips out the market movements reflected in a fund’s performance to see how much value a fund manager actually adds and how consistent they are in doing so.
Only those funds that pass the AlphaQuest test go on to the second stage of our ratings process and potential get an Elite Rating.
And, while no one wants to be paying over the odds for an investment, for us, it’s performance returns after fees that are important. Sometimes it is worth paying a bit more for better results.
That said, the cost of a fund can have a big impact on returns. So, what if you could have the best of both worlds?
Below we list the 10 cheapest funds on FundCalibre. Each fund charges an ongoing annual fee of 0.51% or less. This means, for every £10,000 invested, you are paying the management company £51 per year to invest on your behalf.
|Rank||Fund/Trust name||Ongoing charge (%)*||Cost per annum of £10,000 invested|
|1||Scottish Mortgage Investment Trust||0.34%||£34|
|2||City of London Investment Trust||0.36%||£36|
|3||Baillie Gifford High Yield Bond||0.37%||£37|
|4||Artemis Corporate Bond||0.39%||£39|
|5||Artemis Target Return Bond||0.40%||£40|
|6||M&G Strategic Corporate Bond||0.41%||£41|
|7||M&G Corporate Bond||0.41%||£41|
|8||AXA Sterling Credit Short Duration Bond||0.42%||£42|
|9||Invesco Corporate Bond||0.50%||£50|
|10||Baillie Gifford American||0.51%||£51|
*Source: FE fundinfo, 15 September 2021