Jasmine Birtles
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How to Compare Two Investment Funds in 5 Steps
Ruby Layram
4th Nov 2026
You’ve narrowed your choice to two funds. Both look decent, both have impressive-sounding names, and now you’re stuck. Sound familiar? Comparing funds can feel like homework designed by someone who loves jargon, but it doesn’t have to be. In this guide you’ll learn a simple five-step method to compare two investment funds side by side, spot the differences that actually matter, and make a confident choice.
A fund is a basket of investments, such as shares or bonds, pooled together with other investors’ money and run by a professional or by a computer that copies an index. If any terms below are new, our A-Z of investing terms will help.
Before you start: gather the right documents
Every fund has a fact sheet and a Key Information Document (KID). The Financial Conduct Authority (FCA) describes the KID as a short, standardised document, up to three sides of A4, designed to help you understand and compare a product’s key features, risks, rewards and costs. Because it follows a fixed layout, it is ideal for putting two funds side by side.
You can usually find both on the fund’s page on your investment platform or the fund provider’s website. Open both for each fund and keep a notepad or spreadsheet handy.
Step 1: Check they are doing the same job
This is the step most beginners skip, and it matters most. There is no point comparing a fund of UK shares with a fund of global bonds, because they are built to do different things. Before comparing numbers, check that both funds share the same basics:
- Asset type: shares, bonds, property or a mix?
- Region: UK, US, global or emerging markets?
- Style: does the fund copy an index (passive) or try to beat it (active)?
- Benchmark: the yardstick the fund measures itself against, such as the FTSE All-World.
If you are comparing two global share funds, great. If one is global and one is UK-only, you are comparing apples with pears. For more on picking between index trackers, see our guide on how to choose an index fund.
Step 2: Compare the costs
Costs are the most reliable difference between two funds, because unlike returns they are known in advance. The key figure is the ongoing charges figure (OCF), the yearly fee taken from the fund, shown as a percentage. MoneyHelper notes that fees and charges can reduce your earnings, especially over longer periods.
Look at three things for each fund:
- The ongoing charge, which covers the management fee and running costs.
- Transaction costs, which the fund pays when it buys and sells investments, shown in the KID.
- Platform costs, which depend on where you buy. Fidelity points out that fund charges are set by the fund companies, while platform fees are set by the platform, so check both. See our investment platform comparison.
Here’s why this matters. Say £10,000 grows at 6% a year before costs for 20 years. This is a simplified illustration, not a forecast. With a 0.10% charge, you’d end up with about £31,500. With a 0.75% charge, about £27,800. Same investments, roughly £3,700 gone in fees. Small percentages add up.
Step 3: Look under the bonnet
Next, see what each fund actually owns. Open the fact sheet and check the top 10 holdings, the split by country and the split by industry. You are looking for:
- Concentration: if the top 10 holdings make up half the fund, it is riskier than a fund spread over thousands of companies.
- Overlap: if you already own one of the funds, the other might hold many of the same companies, so you would not be adding much variety. Some platforms, including Fidelity, have tools that show overlap between your funds.
- Surprises: a “global” fund can still hold a large share in the US, for example.
Our guide to ETFs for first-time investors shows how this looks for some popular funds.
Step 4: Compare performance the fair way
Performance is the bit everyone wants to look at first, but it is the easiest to misread. Past performance is no guarantee of the future, so use it as a clue, not a promise. To compare fairly:
- Use the same time periods for both funds, such as the last 1, 3 and 5 years.
- Look at year-by-year returns, not just the total, to see how each fund behaved in a bad year.
- Compare each fund with its benchmark. A fund that lags its own benchmark after charges is worth questioning.
- For index trackers, look at tracking difference: how far the fund’s return falls short of the index it copies. Smaller is better.
- Check the risk indicator in the KID, which gives each fund a score from 1 (lower risk) to 7 (higher risk). A fund with higher returns may simply have taken more risk.
Many platforms have a chart-and-compare tool that lets you plot funds on one graph, which makes this step quick.
Step 5: Check the practical details
Finally, make sure the fund works for you in real life:
- Is it available on your platform, and in your Stocks and Shares ISA? See our list of the best Stocks and Shares ISAs.
- Accumulation or income version? Accumulation reinvests income automatically, while income pays it out as cash.
- Fund size and age: a very small or brand-new fund may have less of a track record and can be closed if it fails to attract money.
- Currency: some funds are priced in pounds, others in dollars or euros, which may add currency costs.
Put it together: a simple scorecard
Use a table like this to fill in each fund’s details and tick the winner on each row.
| What to compare | Fund A | Fund B |
|---|---|---|
| Same job? (asset type, region, benchmark) | ||
| Ongoing charge and transaction costs | ||
| Top 10 holdings and spread | ||
| 1, 3 and 5 year performance vs benchmark | ||
| Risk score (1 to 7) | ||
| Available in my ISA or pension? | ||
| Acc or inc version |
If one fund wins on costs and spread, and the rest is roughly level, that is often your answer. If it is still close, either choice is likely to be fine. Beginners often put off investing while searching for the perfect fund, but time in the market usually matters more than the perfect pick.
Our guide to the best investments for beginners shows where to start, and how to invest in index funds walks you through buying one.
What to do next
- Pick your two funds and download the KID and fact sheet for each.
- Work through the five steps and fill in the scorecard.
- Check costs on your chosen platform, including any dealing or platform fee.
- Start small and invest regularly rather than all at once.
- Review once or twice a year, rather than daily.
FAQs
How many funds do I need? Many beginners start with one broad, low-cost fund. You can add more later.
Is the cheapest fund always the best? Not always. A slightly more expensive fund may suit your goals better, but you should have a clear reason for paying more.
Can I rely on star ratings? Treat them as a starting point only. They look backwards, so do your own comparison using the five steps.
Disclaimer: This article is for informational and educational purposes only and is not regulated financial advice. Investing involves risk, investments can go down as well as up, and you could get back less than you put in. Past performance is not a reliable guide to future returns. The cost example is illustrative only. Do your own research or speak to a regulated financial adviser.
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