Hot tips on how to reduce investment costs 
(15/12/2009)
Michael Barr, a UK specialist in Index Investing, offers some Hot Tips on how to reduce investment costs:
It may be a surprise to learn that the cost of investing has increased in recent years when the price of most other goods and services has been falling. As a result, more investors are now focused on reducing the cost of investing. Costs are a very important part of the investment equation because when investing in stock markets for long-term growth, the only certainty is the investment cost.
A number of years ago academics in America, including Nobel Laureates, pioneered a way of investing that would beat the average investor over the longer term. The system was initially developed for multi-million dollar pension schemes.
An important characteristic is a more reliable investment return with lower costs - a style of investing known as indexing. This is a method which aims to track stock market returns and avoids the risk of having an investment disaster due to poor fund management.
Until relatively recently, it was not possible to implement an index tracking strategy in the UK very easily, and it was the preserve of institutional fund managers. But now, more financial advisers are becoming knowledgeable about indexing, and there are many more funds to choose from than there were three years ago.
When it next comes to making an investment decision make sure you consider index investing for:
- low costs
- reliable returns
- easier financial planning
- avoiding disasters.
Michael Barr is due publication of a book in early 2010 which will feature Index Investing. The title, ' How to invest better than an orang-utan' was inspired by a controlled experiment during which monkeys made random investment selections by throwing darts at the Wall Street Journal. In the long run, they did better than many professional fund managers.
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