Funds & Trackers
Reading a fund fact sheet without being sold to
A fact sheet is a regulated document and a marketing one at the same time. The useful parts are rarely the largest.
Both approaches to fund fact sheets work. What differs is what they cost you, and the cost is what this sets out.
The difference in one place
- Ongoing charges, index tracked and holdings concentration are the informative fields.
- Past performance charts are the least predictive part of the document.
- Domicile and replication method affect tax and tracking.
Start with the cost
The ongoing charges figure is the headline annual cost and is the most reliably predictive number on the page. It is not the whole cost — transaction costs inside the fund and platform fees sit on top. Comparing two similar funds starts and often ends here.
Identify what it actually tracks
The index determines what you own, and indices with similar names can differ substantially in coverage. A world index excluding emerging markets is a different investment from one including them, though both may be described as global. The fact sheet names the index; looking up what that index contains takes two minutes.
Concentration matters
Top-ten holdings as a percentage of the fund tells you how diversified it really is. A global index fund can still have a substantial share in a handful of very large companies, which is a legitimate feature to know about.
Diversification by number of holdings alone is misleading without the weighting.
Replication and domicile
Physical replication holds the underlying securities; synthetic uses derivatives and introduces counterparty considerations. Fund domicile affects withholding tax on dividends and how distributions are taxed for you, and it varies by your own country. Accumulating and distributing share classes differ in whether income is reinvested automatically.
Adjust the size of it until it is something you would actually do tired.
Ignore the performance chart
Past performance has weak predictive power, which is why the warning is a regulatory requirement rather than a formality. Charts are typically shown over periods that flatter the fund and rarely include the full cost drag. The fields above tell you more about future outcomes than the line does.
Side by side
| Consideration | What it means in practice |
|---|---|
| Start with the cost | Ongoing charges, index tracked and holdings concentration are the informative fields. |
| Identify what it actually tracks | Past performance charts are the least predictive part of the document. |
| Concentration matters | Domicile and replication method affect tax and tracking. |
The takeaway
Cost, index, concentration, domicile. Then close the document.
Small and repeatable beats ambitious and abandoned, almost every time.
Questions readers ask
What is a reasonable ongoing charge?
Broad index trackers are widely available at a small fraction of a per cent. If a fund costs materially more, the question is what specifically that buys.
Accumulating or distributing?
Accumulating reinvests automatically and is simpler for long-term growth. Distributing pays income out, which suits drawdown and may differ in tax treatment.
Also by Joachim Brandt
- The decisions that only need making onceGetting Started
- Diversification is not the number of funds you ownFunds & Trackers
- The annual review that takes twenty minutesGetting Started
