{"id":8691,"date":"2018-05-05T11:25:46","date_gmt":"2018-05-05T09:25:46","guid":{"rendered":"https:\/\/www.smolio.ch\/wissen\/every-little-helps-what-a-difference-a-small-fee-makes\/"},"modified":"2025-03-16T14:56:53","modified_gmt":"2025-03-16T13:56:53","slug":"every-little-helps-what-a-difference-a-small-fee-makes","status":"publish","type":"post","link":"https:\/\/www.smolio.ch\/en\/wissen\/every-little-helps-what-a-difference-a-small-fee-makes\/","title":{"rendered":"Every little helps. What a difference a small fee makes"},"content":{"rendered":"Lesedauer<\/span> 2<\/span> Minuten<\/span><\/span>\n

When investing, some people are completely put off by the fees – you have to recoup them first. Others don’t pay attention and then pay the bill. In fact, a small difference in fees makes a big difference. We compare active and passive investment products and do the math. <\/span><\/p><\/div>\n\n\n\n

Reto is 34 years old and has an investment horizon of 31 years until retirement. His long-term investment horizon allows him to build up his 3rd pillar pension provision with equity funds. What is the difference in fees between active and passive funds in Swiss francs? <\/strong> <\/span><\/p><\/div>\n\n

To do this, Reto first looks at two different pension funds. He compares a passive and an active 3a investment fund<\/a>, each with an equity allocation of 75 %. Because the products do not only invest in equities, he reduces the expected return to 5 %. Reto pays in the annual savings installment at the beginning of the year, because he has learned that he is better<\/a> off doing so. Unfortunately, Reto also has to pay an issue commission of 2.5 % for the passive pension product and therefore includes this in his calculations. <\/span><\/p><\/div>\n\n

Impact of different fees for active and passive pension products 3a<\/h5>\n\n
Example 1 – Investment in tied pension provision<\/b><\/th>active 3a product<\/b><\/th>passive 3a product<\/b><\/th><\/tr><\/thead>
Investment amount p.a.<\/td>6,768 francs<\/td>6,768 francs<\/td><\/tr>
Yield p.a.<\/td>5.0 %<\/td>5,0 %<\/td><\/tr>
One-off investment costs<\/td>2.5 %<\/td>2.5 %<\/td><\/tr>
Fees p.a.<\/td>1.83 %<\/td>0.38 %<\/td><\/tr>
Investment period<\/td>31 years<\/td>31 years<\/td><\/tr>
3a assets at 65<\/td>around 350,300 francs<\/td>around 456,600 francs<\/td><\/tr><\/tbody><\/table><\/figure>\n\n

The fee difference of 1.45 % has a fairly large impact over the long term: <\/span>with the cheaper product, you end up with around 106,300 francs or 30 % more.<\/b> Reto rubs his eyes<\/b> and wonders what this means for his fund in free assets.<\/span><\/p><\/div>\n\n

A year ago, Reto also bought into an active, global investment fund with an excellent Morningstar rating that has been on the market for over 10 years. For this fund, 1.8 % management costs are deducted from his fund assets each year. This is in the mid-range of the usual management costs of 1.5 to 2.1 % per year. As an alternative, he now looks at an ETF<\/a> on the MSCI World, a benchmark index for global equity investments. These have management costs of 0.15 % to 0.65 %. Reto chooses the cheapest product for the comparison. As he now invests 100 % in equities, he calculates with the average annual return of the MSCI World over the last few decades. For the ETF, he only includes the purchase fee on the stock exchange because, unlike with the fund, he does not have to pay an issuing commission. <\/span><\/p><\/div>\n\n