Q. In 2000, I made an investment of £3,500 in the Fidelity Moneybuilder Balanced Fund ISA, from which I incurred a charge of £134.61. Now, after 24 years, the investment’s value stands at £11,435. For the year ending May 2024, the investment returned 1.92% after charges. In the past year, I’ve also faced a £90 service charge (which was £45 per year until February 2023) and additional investment charges of £72.61. Every year, I receive transaction lists that are difficult to comprehend. This experience may serve as a reminder to invest only in areas I fully understand. What should my next steps be?

Many inquire about the “best” fund, but determining this is complex. The ideal fund for someone willing to take significant risks with a long investment horizon differs radically from one suited for an investor with a conservative approach and a need for consistent income.

Investors focused on growth typically gravitate towards funds that include equities (stocks), while those prioritizing income may explore options involving bonds, commercial properties, and infrastructure.

For those using a DIY investment platform, selecting funds will be up to personal discretion. Most platforms categorize available funds, simplifying the selection process.

If you find the task of selecting investments overwhelming, consider using a robo-investing platform like Silo or Nutmeg. These services guide you through a survey to determine your risk tolerance and then invest in a diversified portfolio of funds automatically. Regularly, you’ll be prompted to update your questionnaire responses and your portfolio will adjust accordingly.

Assessing Performance

To evaluate your portfolio’s performance accurately, choose a relevant benchmark, such as the S&P 500 for American stocks.

Investment management firms often utilize the Asset Risk Consultants (Arc) indices for performance comparison. These indices are derived from real data collected from investment companies nationwide, with annual figures available online.

For those interested in fund performance metrics, resources like Morningstar and Trustnet can be invaluable. These platforms allow you to compare a fund’s performance against appropriate benchmarks over different time frames and examine the underlying investments within each fund.

Data from Morningstar indicates that the Fidelity MoneyBuilder Balanced Fund has underperformed compared to both its benchmark and its peer group over the past five years.

Approximately 36% of the Fidelity fund’s assets are allocated to long-dated government bonds, which are essentially loans from investors to the government, promising fixed annual interest (coupons). As interest rates climb, the desirability of these bonds diminishes, leading to a decline in their prices. Long-maturity bonds are particularly vulnerable to interest rate shifts, performing poorly in 2022 when rates increased.

In contrast, shares constitute 63% of the Fidelity fund, primarily invested in UK stocks. The UK stock market has markedly lagged behind global markets in recent years due to its lack of major technology companies that have driven substantial growth, along with a decline in investor interest following Brexit.

Understanding Investment Charges

When purchasing a fund through a platform, anticipate both platform and fund charges. Actively managed funds, where a manager actively selects investments to outperform a benchmark, generally incur higher costs than passive funds, which mirror the holdings of indices like the FTSE 100 or S&P 500. Actively managed funds often cost about 1%, while passive ones could be as low as 0.1%. Being fully aware of all fees is crucial in evaluating investment performance after accounting for costs.

While I cannot dictate your next steps regarding your investment, I recommend comparing the fees, performance, and asset allocations of your fund against similar options to aid your decision-making process.

Rachel Winter is a chartered wealth manager with experience since joining Killik & Co in 2012, where she is a partner in the investment management team.