Trustnet Magazine 88 October 2022 | Page 66

IN THE BACK
ensure I am comparing apples with apples , I used Vanguard LifeStrategy 100 % Equity , which has the same charges as its less adventurous stablemate . Perhaps these figures don ’ t really support my hypothesis : while the difference in performance is small over shorter periods of time , Fundsmith Equity has powered ahead over the long term . £ 500,000 invested in Smith ’ s fund 10 years ago would now be worth £ 2,188,797.81 , compared with £ 1,329,005.95 from the Vanguard strategy – a difference of £ 859,791.86 . These figures are after charges , so Smith ’ s expertise appears well worth paying up for . The problem is , we don ’ t know if he will be able to deliver the same performance over the next decade , now his fund is much bigger and the global macroeconomic environment has been turned on its head . All we know is that Fundsmith Equity is four or five times more expensive than the Vanguard product .
Look after the pennies We easily dismiss a couple of basis points as being unimportant , but I cannot stress enough that you should view every one as critical to your investment outcome . With a portfolio that , over a period of perhaps 40 years , can reach a value of millions , the cumulative effect of a few basis points here and there can result in hundreds of thousands of pounds in lost value . The point is that you should look closely at the funds that produce consistent returns in the sectors and geographies that you are attempting to access in your portfolio . Are there cheaper funds available that consistently outperform or match the performance of their benchmark ? The amount you are paying the fund manager in charges is just as important as past performance , so ask yourself if you are getting value for money . Funds are now obliged to demonstrate this by producing Assessment of Value ( AoV ) reports for their investors , but they are usually well hidden and can be confusing even if you manage to find them . Remember , performance comes and goes with all funds , but charges are constant .
Platform ruse Given you can save a lot on individual funds , what about the cost you pay for the administration ? Most
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