Low cost funds

It is important to choose a low cost fund for your investment. If you invest in equities for the long term, you should be able to get an average yield of 3% to 4% above Government bonds. This should give a gross yield of about 6% to 7%.

If the expense ratio of the fund is 2.5% (which is quite typical), you will get a net yield of only 4% (after charges). If the expense ratio is 1%, you get a net yield of 5.5%.

The difference of 1.5% in the yield can amount to more than 15% over 10 years. It is important to invest in a low cost fund, so that you can keep most of the yield.

The experience of most investors is that the speculative funds incur high charges and do not produce a better yield over the long term. In fact, many speculative funds lost money for the investors.