Buying shares directly incurs costs. Buying shares indirectly (through a fund or a structured financial product, for example) incurs other costs. The whole process is (deliberately?) opaque.

The regulator does its best to outlaw on your behalf the more egregious charges, particularly those that create incentives for biased advice. But it's always going to be one step behind. The list of costs in the next section includes some that are banned for many products at the time of writing. We make no apology for this. Forewarned is forearmed.

Excess costs can trash your savings through the mathematics of compounding. Be sure you understand the extra costs of any investment before you make it.

Costs matter because.....

The mathematics of compounding makes small percentages important.

The costs of funds and investment trusts in the UK may range between 0.1% and 4% per annum.

Over 20 years, a fee of 0.1% per annum would take 3% of a single lump sum (5% over 40 years). Over the same 20 years, a fee of 4% per annum would take  60% of a single lump sum (85% after 40 years).

So fees have got to be justified by above-average performance.

But.......

The fund management industry continues to argue about unbiased measurement methods that allow investors to make informed choices. It has preferred instead to rely on traditional advertising techniques. And....

There is no reliable evidence that the historical performance of a fund is any guide to future performance. In fact the regulator has gone so far as to ban the use of historical performance figures in advertising.

So even if there are such things as "better managed funds", the average investor has little chance of identifying them. They might as well pick on the basis of low added costs. Harder than it sounds….