Facts about charges

• All funds charge an annual management fee, typically between 0.5 per cent and 1.5 per cent, but charges can go both lower and higher.
  
• Many also make a one-off charge when you buy, or sometimes, when you sell. This is usually between 3 and 5 per cent. It is deducted from your investment, so if you put £3,000 into a fund charging 5 per cent, only £2,850 will actually be invested in the fund.
  
• The annual charge sounds smaller, but is more important over the longer term. A small step up in annual charges can make a big difference to the value of your investment over time.
  
• A charge of 1 per cent a year can result in a reduction to your fund over a 20-year period of more than 20 per cent!
  

How to find low charges

• ISAs that carry the government CATmark are guaranteed to charge no more than 1 per cent a year.
• Index tracking funds are some of the cheapest funds you can buy.
• Investment trusts usually carry lower charges than unit trusts or oeics. Large investment trusts are particularly low cost as they benefit from economies of scale.
  

Check your charges
You can get more details of the effect of charges from the key features documents provided by fund providers. These include a table showing how charges reduce the return.It is also important to look out for something called the "total expense ratio", or TER.

This measures the total costs, including dealing charges, incurred by a fund and can be far higher than the charge admitted by the fund manager. Use the ISA charges calculator to find out how the charges on a fund will affect your money. To find out more, click here.

FT Fund Ratings
The FT Fund Ratings system, which takes TERs into account when looking at funds, is another vital element of your assessment of funds. For more information, on FT Fund Ratings please click here. To go straight to FT Fund Ratings, please click here