Jasmine Birtles
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A Beginner’s Guide to Investment Fees (And How to Stop Them Eating Your Returns!)
Ruby Layram
2nd Dec 2025
If you’ve ever opened your investment account and thought, “Hang on… why is my money going down even when the market’s going up?”, chances are, fees might be the culprit.
The good news? Once you understand the different types of charges, you can keep more of your own money, invest smarter, and feel far more confident navigating the world of investing.
In this guide, I will break down the most common types of fees that you might come across as an investor and how to navigate them.
Why Investment Fees Matter
Fees are perhaps one of the most underrated factors to consider when you start investing. If you’re not careful, they can quickly eat into your investment returns!
For example:
A £10,000 investment growing at 7% for 30 years becomes £76,123.
The same investment with a 1% annual fee?
You end up with £57,434, that’s nearly £19,000 lost to fees.
So yes… fees matter. A lot.
The Main Types of Investment Fees You Need to Know
Here is an overview of the different types of fees that you should watch out for as an investor. Not all platforms will charge every single type, but you will always run into at least one!
Platform Fees
This is what your investment platform charges you for simply holding your money with them.
You might see:
- A percentage (e.g., 0.25% per year)
- A flat monthly cost (e.g., £4 per month)
- A capped fee (e.g., you pay up to a maximum each year)
Tip:
If you have a large portfolio, flat-fee platforms are usually cheaper. If you’re just starting, percentage-based fees may work out better.
Fund Management Fees (OCFs)
If you invest in funds or ETFs, you’ll see something called:
- OCF (Ongoing Charges Figure)
- TER (Total Expense Ratio)
This covers the cost of running the fund, paying analysts, trading costs, admin, etc.
Typically:
- Index funds: 0.05%–0.25%
- Actively managed funds: 0.6%–1.5%+
Tip:
Low-cost index funds often outperform expensive active funds long-term.
Transaction or Dealing Fees
Some platforms charge when you buy or sell:
- £5–£10 per trade
- Or a small percentage fee
This applies more to individual shares or ETFs than to automated investing apps.
Tip: If you’re buying little and often, choose a platform with free or low-cost trades.
FX (Foreign Exchange) Fees
If you buy international stocks (think US companies like Apple or Tesla), your platform may charge an FX fee to convert your pounds into dollars.
Typical FX fees: 0.25%–1%.
Tip: Some platforms offer lower FX fees for premium accounts, but only upgrade if the maths works!
Exit Fees (Less Common Now)
A handful of platforms still charge you to leave and move your investments elsewhere.
Often: £15–£25 per line of stock.
Top tip: Always check the exit fees before committing to a platform.
Performance Fees (Mainly Active Funds)
Some actively managed funds charge extra when they perform well.
For example: “20% of returns above the benchmark”
Performance fees don’t always mean better returns, so proceed with caution.
How to Keep Your Fees Low (Without Compromising Your Portfolio)
Here are simple, smart strategies that you can implement as a complete beginner.
- Choose low-cost index funds whenever possible: These often outperform and keep your fees tiny.
- Compare platform fees before you commit: Use comparison tools or check each provider’s fee table.
- Don’t trade too often: Frequent buying and selling racks up costs. Slow and steady wins the race.
- Watch out for sneaky FX charges: Especially if you’re a fan of US stocks.
- Automate your contributions: Some apps offer reduced fees for regular investing. Plus it keeps you consistent.
Final Thoughts
Once you understand the different types of investment charges, you’re no longer in the dark. You can make confident choices, avoid unnecessary costs, and put more of your money to work for you.
Smart investing isn’t just about what you buy, it’s also about what you keep.
And now? You’re officially a fee-savvy investor.
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Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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