THE INVESTMENT CHARGES THAT COULD EAT INTO YOUR NEST EGG

INVESTORS could easily lose tens of thousands of euros of a nest egg to investment charges over 15 or 20 years, depending on where they have invested their money. It is important, therefore, to understand exactly what charges you will be hit with when you put your money into an investment.

Here are some of the main ones to watch out for.

Contribution charge

Some companies hit you with a contribution charge every time you save money into an investment fund or savings plan. This charge could be 5pc or more.

If there’s no mention of a contribution charge, check the allocation rates (the percentage of your savings which are invested in your fund). An allocation rate of 95pc means that only 95pc of your money is being invested into the fund — with the rest gobbled up by charges. Aim for an allocation rate of 100pc.

Annual fund management charge

Charged each year for the management of the money in your investment or pension fund, this fee is typically between 1pc and 1.5pc of the value of your fund.

It can be even higher if you invest in a specialist fund. Fund managers will charge this fee even if the fund you’ve invested in is losing money. As you are being charged a percentage of the fund value, this annual charge will increase if and as your investment fund grows.

Exit penalties

These sort of fees are typically charged if you decide to cash in your investment, or if you withdraw money from it, within the first five years of opening the fund.

Exit penalties are typically between 1pc and 5pc of the value of your fund. Not all investment funds and products have exit penalties, however — so choose one that doesn’t.

Performance fees

These fees are generally charged if your fund performs well. They’re charged on top of your normal fees and can be quite expensive.

Transaction fees

Transaction fees are trading expenses charged to an investor when buying or selling the shares of stocks, mutual funds and Exchange Traded Funds.