Index fund comparisons

We compare Australian share index funds and profile a low-cost Exchange Traded Fund.
 
Learn more
 
 
 
 
 
  • Updated:6 Mar 2006
 

08.Fee comparison

The fees you pay for your investments can have a big impact on your returns. The table below compares the after-fee returns for various index funds, based on $10,000 invested for five years (the minimum recommended by some fund managers), with annual growth (before fees) of 8%.

  • Other things being equal, lower fees mean an ETF gives the best return (about $300 better than a competitive index fund, which in turn is around $1000 better than a fund with high entry/management fees).
  • The results will differ depending on assumed return, investment timeframe and amount, and other factors, such as brokerage you pay to invest in an ETF (we assumed $30, a reasonably competitive rate from an online broker), or the fees you negotiate with a financial planner.

 

 

Sign up to our free
e-Newsletter

Receive FREE email updates of our latest tests, consumer news and CHOICE marketing promotions.

 
Effect of fees on index fund returns
streetTracks S&P /
ASX 200 Fund (a)
Vanguard Index
Australian shares (b)
BankWest Top 200
(c)
Fund with higher entry/
management fees (d)
Entry fee ($) NA Nil Nil 400
Stock broker fee ($) 30 NA NA NA
Ongoing management fee (MER) ($) 173 451 586 797
Total entry and ongoing fees ($) 203 451 586 1197
Return after entry and management fees ($) 14,449 14,170 14,013 13,180
Exit /stockbroker selling fee ($) 30 Nil Nil Nil
Return after exit fee ($) 14,419 14,170 14,013 13,180

Table notes

Assumptions: $10,000 invested for five years, annual return before fees of 8%. For simplicity, we assume you don’t pay an adviser service fee and we don’t take account of taxes or inflation.

(a) We assume brokerage fee $30, MER 0.286%.

(b) No entry or exit fee, MER 0.75%.

(c) No entry or exit fee, MER 0.98%.

(d) Entry fee 4%, no exit fee, MER 1.4%.

This article last reviewed March 2006