The STRIDE Blog

Choosing an Investment Strategy: Costs and Returns

stride-costs-and-returns-featured-1.jpgIf choosing an investment strategy was child's play, everyone would be investing. But in reality, it's necessary to do extensive research to determine which strategy best suits you. Let's face it, even comparing only the most acclaimed investments strategies can be unnerving.  

The idiom "when the going gets tough, the tough get going" suggests that strong people take action when situations become difficult. But what if you aren't tough? No need to despair. Why? Because we've done all the work for you

To simplify your investment choices, we've researched and analysed financial data to compare how STRIDE, fund managers and index funds hold up against each other on different levels. We then structured our findings in a fun, quick and easily consumable format: an infographic.  

But before we get to downloading our great infographic, let's delve into the costs and returns associated with the top three investment strategies.  

The Costs and Returns of Investment Strategies 

1. Fund Managers 

To arrive at the averages in this section, we analysed the data from various fund managers in the UK and EU, including: BlackRock, Vanguard Asset Management (UK and USA/EU), State Street Global Advisors and Carl Icahn’s actively managed mutual funds (which is an investment program funded by shareholders, that trade in diversified holdings and is professionally managed). Below are the averages of this assessment:  

Investing with a fund manager is the most expensive strategy, and surprisingly promises the lowest returns.  

Their average annual cost is 1.173% of your investment portfolio. It’s important to note that a mutual fund can also have many operating fees, outside of the costs the general costs of buying and selling securities as well as paying your fund manager's commission. These might include marketing, legal, auditing, filing, and other administrative costs. 

On the matter of returns, fund managers generally under perform the market, only producing an average of 3.29% annual yield 

2. Index Funds 

To best analyse the average cost and returns of index funds, we analysed the average performances of the S&P 500, FTSE 100 and the Euro 600.  

Index funds are the most cost effective investing option, with an annual fee of only 0.314% of your portfolio's value.. There are also no additional expenses when investing in an index fund. The returns, while not high, are better than that of fund managers. On average, you will receive a 6.84% annual return. 

3. STRIDE 

STRIDE is a stock picking a portfolio management tool. It does not invest in stocks for you, but provides you with clear insights and guidance as to which stocks to buy, hold or sell, and when to do so.  

STRIDE is slightly more expensive than index funds, but its returns far outweigh both index funds and fund managers. 

Despite your investment size or returns, STRIDE has a fixed fee of $499 per year and there are no additional or hidden costs. This while your expected returns average at 21,06% annually. That’s astoundingly more than three times the average return ratio of index funds, and nearly seven times the average return ratio of fund managers. 

Although investing in index funds is the cheapest option, STRIDE proves to be the strongest strategy due to it's affordable cost and outstanding returns. Interestingly enough, our findings place fund managers at the bottom of the pack, performing well below both STRIDE and index funds in cost and returns. 

Learn which investment strategy is right for you by downloading our comparison infographic below. The best investment strategy for you: An infographic comparison of STRIDE, fund managers and index funds.

Topics: 3D Value Investing

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3D Value Investing: Triangulating The Best Investment Targets

3D Value Investing uncovers the best businesses for investment, the fair value of those businesses and the best times to buy in and sell out. This approach to long-term investing results in higher returns with lower risk.

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