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The effect of fees on your money


The effect of fees on your money

Reading Time: 2 minutes

The question most people don’t ask when investing their money – whether it is for retirement or for their kids’ university fees – is:

What are your fees?”

It’s not enough to look at a fund’s expected performance– you should also consider what it will cost you to invest in that particular fund. Many-a-time the quoted expected performance of a fund is given before fees have been deducted. This can lead you to expect much more than what you should be expecting.

If say unit trust A and unit trust B both offer you the same return, but fund B has higher fees, you should be investing in fund A. But you wont know this unless you ask the question “What are your fees?”. Many funds actually offer the exact same return but have different fees charged; in this case, if you are investing in the more expensive fund, you are wasting money.

The Force of fees

To the ordinary person, an annual fee of 2.5% appears quite low – even docile. But the difference between 2.5% and 1% fee per year is MASSIVE!

Allow me to explain with a short example:


  • You save R500 a month
  • Every year you increase your savings by 6% (inflation). So in year 2 you invest R530 and so on.
  • You earn on average 13% every year on each investment

The picture below will show you the difference between paying 2.5% per year in fees and 1% per year fees over time;


Fund with 1% fee

Fund with 2.5% fee

Your possible savings purpose

Money lost


R 250 928

R 230 238

Your Kids university Fees

R 21k


R 1 131 718

R 938 645

To Buy or pay off your home

R 193k


R 4 033 539

R 2 987 590

Your Retirement/ leaving kids an inheritance

R 1m


R 13 296 341

R 8 713 256

Your Retirement/ leaving kids an inheritance

R 4.6m

Losing 4.6 million Rand just because you were charged 1.5% higher fee is not funny, but it’s a reality for many people. If you do not know the fees to your current savings, you really should find out. You could be throwing away a lot of money. If you are about to invest, find out what you will be paying for fees

Ask your advisor to explain all the fees in detail. If you opt not to get a financial advisor you should read the fund’s fact sheet.



Benjamin is an Actuary working at a major financial services firm. He has experience in the valuation, design and distribution of wealth and investment products. Benjamin is insatiably passionate about teaching and empowering minds. All views expressed are Benjamin's own and neither reflect nor are influenced by the views of affiliated companies.

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