The beginner’s guide to investing fees and charges

Key takeaways

• Investing fees are the costs you pay to use an investment platform and buy, sell, or hold investments

• Small fees can add up over time because they reduce the money left invested

• The cheapest option is not always best – so make sure you compare the total cost, and check how suitable the platform is for your needs

When you start investing, fees aren't usually top of mind. But then the charges appear. To add to the confusion, every platform takes its own approach – some charge a flat fee, others a percentage, and what's included varies from one to the next. The good news is, investing costs are far simpler than they seem. Fees are just the price of the services involved – holding your account, running a fund, buying or selling your investments. They're a standard practice, but they make a difference: every pound you pay in fees is a pound that's no longer working for you. This guide covers the most common costs, where they show up, and how to weigh them up.

What are investing fees?

Investing fees are the costs you pay when you use an investing service or own an investment. In the plainest terms, different parts of the process are run by different companies, and each takes a small cut for the job they do. One fee might go to the company that holds your account and keeps your investments safe. Another might go to the folks who manage the fund you've chosen. There are really two cost decisions you make: which platform to use and which fund to buy. Platform fees can vary a lot, so they're worth comparing. A fund's charge, on the other hand, stays much the same, whichever platform you use.

It's worth saying this clearly, though: fees aren't automatically a bad thing. They pay for genuinely useful services – an app that's easy to use, a fund that spreads your money across hundreds of companies, and the admin of keeping everything running and reported correctly. The thing to keep in mind is the trade-off. The more you hand over in fees, the less of your money stays invested to grow over time. So investing wisely isn't about dodging every possible cost – it's about knowing what you're paying for, and making sure it's worth it.

Where might I see fees?

Fees turn up in a few predictable places: a platform's charges page, an investment's factsheet, the screen before you confirm a purchase, and your yearly statement.

Some are easy to spot – a clear monthly or yearly charge. Others are subtler, taken automatically from your account, from inside a fund or retaining interest that you would otherwise have earned. And as a result, you may never see the money leave; it might simply shave a bit off your return.

Before you open an account or pick an investment, scan for words like "fees", "charges", "dealing charge", "platform fee", or "fund charge". Spotting those words is half the task.

What is a platform fee?

A platform fee is what you pay the company that holds your investment account. It might also be referred to as an account fee or service fee.

It's usually charged in one of two ways.

The first is a percentage, based on the value of the investments and any uninvested cash you hold on the platform. And in those cases, something between 0.25% and 0.45% a year is common. The second is a flat amount – for example, a set monthly fee that doesn't change with the value of your investments.

The difference matters. On £1,000 invested, a 0.35% fee is £3.50 a year. A flat £5 a month, meanwhile, adds to £60 a year – and that’s before your investments have done anything. That's why flat fees deserve a closer look with a smaller pot: the same £5 monthly fee takes a much bigger bite out of £1,000 than it would with £50,000.

What is a fund charge?

A fund charge is what you pay for the fund itself – and it applies no matter which platform you use to buy it. You can choose a cheaper platform, but it won’t shrink the fund's own charge.

That money covers the cost of running the fund, and you'll usually see it as a percentage charged to you each year, labelled an "ongoing charge" or "annual charge". The part that surprises beginners: you often won't see it leave your account as a separate payment. It's taken from inside the fund, so it discreetly reduces your return rather than landing as a bill. It's also worth knowing this charge sits with the fund itself, not the platform – so it comes down to which fund you choose, not which platform is cheapest. The cost of a fund is usually the same wherever you invest in it. However, some larger investors, such as investment platforms (like ours) can access lower-cost versions of the same fund. These versions have lower fees because they are designed for organisations that invest large amounts of money. Investments by MoneySuperMarket chooses from these lower-cost versions whenever possible, helping you keep more of your money invested by reducing the fees you pay. Fund charges are always disclosed – but it's easy to forget, so check it before you buy, just like the platform fee.

What is a trading fee?

A trading fee – sometimes called a dealing or share-dealing fee – is what you pay each time you buy or sell an investment. The key thing to understand is that it's charged per transaction, not based on how much you hold. So it's how often you invest that drives the cost, not the size of your pot.

That's why this is the fee most likely to creep up on you. Buy into one fund with a yearly lump sum, and a trading fee barely registers. But drip-feed money in every month – or buy several investments each time – and the costs stack up. Say a platform charges £10 a trade: investing monthly into three funds would cost £360 a year before your money has done anything. This is where a regular-investing option – which lets you automatically invest a set amount at fixed intervals – can help, as platforms often charge less for these scheduled trades than for standard one-off purchases. So if you plan to invest little and often, check what a platform charges per trade.

What about hidden fees?

It's common to keep a small amount of cash in your investment account to cover fees or while you're deciding where to invest. Over time, any interest earned on that cash can add up. Not all platforms pass this interest on, and it may not always be easy to find out how they treat cash balances. At Investments by MoneySuperMarket, we pass on all interest earned on your cash held in your account, so you receive the full benefit of your money.

What other charges could I come across?

Platform, fund fees, and trading fees are the big three, but a few other little costs can crop up depending on how you invest:

• Regular investing fees – for monthly scheduled investing, usually when you set up a direct debit to invest a fixed amount automatically each month. These are often lower than a standard trading fee.

• Currency fees – for buying investments that are priced in another currency, such as US shares in dollars.

• Transfer fees – for moving investments from one provider to another.

• Managed portfolio fees – an extra charge if a provider chooses and manages investments for you.

You don't need to memorise these. Just be aware that they exist, and know how to determine whether they apply to you.

Why do fees matter over time?

Every pound paid in fees is a pound that's no longer invested and potentially growing. On any single day, that's barely noticeable. But over the course of years, it adds up.

Picture two near-identical funds, both growing at the same rate. And imagine that the only difference between the two is the charge: one takes 0.34% a year; the other, 0.75%. Both sound tiny – but that money is paid every year on a pot that's hopefully getting bigger. Over a couple of decades, the lower-cost fund can leave noticeably more in your pocket. This doesn't mean cheapest always wins – and investments can fall as well as rise – but the longer you invest, the more even a small difference is worth a look.

How do I compare the total cost?

The simplest way to compare is to add up what you'd actually pay across a year, rather than judging by one headline number. A rough checklist: the platform fee, plus the fund charge, plus any buying-or-selling fees based on how often you plan to invest. Together, those give you your real yearly cost.Also remember to check what happens to any cash in your account. Some platforms keep the interest earned on your cash rather than paying it to you, which can act like a hidden cost over time.

Then, weigh that against what a price tag doesn't capture – how easy the platform is to use, whether it offers the investments you want, and whether it fits the way you want to invest. This is where "cheapest" and "best" can part ways: the lowest-cost option might be clunky, or missing something you need.

Which fees matter most if I invest small amounts regularly?

If you're investing small amounts often – say £25 or £50 a month – three costs deserve most attention: flat monthly platform fees, trading fees, and fund charges.

Flat fees don't shrink with your pot, so a set monthly charge takes a bigger bite out of a small balance – what's cheap for a big investor might be expensive for you. Trading fees can hit you every time you buy: pay a fee on each £25 and a chunk disappears before it's invested, which is why some platforms offer a cheaper regular-investing option. And fund charges are paid every year, for as long as you hold the fund.

So compare fees based on how you'll actually invest. If you're drip-feeding into one broad fund each month, check specifically whether there's a charge for regular investing – it's the detail most likely to affect you.

What else should I keep in mind?

You don't need to understand every technical detail before you start. A few costs do most of the work: the platform fee, the fund charge, any buying-and-selling fees, and any extras tied to how you invest.

For most beginners, the sensible starting point is something simple, clear, and fairly priced. Check the fees before you begin, then glance at them now and then as your pot grows or your habits change. Fees aren't something to fear – just one more thing worth understanding, so you can keep more of what your money earns.

Next up: Cutting costs is one way to keep more of your money – tax is another. See how a stocks and shares ISA shields eligible gains from UK tax in our ISA guide.

This information is for education only. It’s not financial advice or a personal recommendation.

Moneysupermarket.com Investments Limited is an appointed representative of P1 Investments Services Limited, which is authorised and regulated by the Financial Conduct Authority (FCA FRN 752005).