What is the administration rate and how does it affect your investments in backgrounds?
By investing in funds Investment funds Or ETFsIt is important to understand the costs of it to make more information. Between Costs that affect your investment returns, A. Administration fee This is one of the main ones. In this article, we explain what this is, how it works and how it affects its long -term profitability.
How much is the administration rate?
A. Administration fee This is the annual cost of charging the amount of investment in funds intended to repent of the professionals responsible for the management of assets. This will cover the administration’s payment, audit costs, rental and technical systems, along with others with the administrative, operational and maintenance costs of the fund.
This rate is calculated based on the amount of investment in the fund and periodically discounted and may be monthly or daily depending on the procedure of the fund. Although this is not a direct charge of fixed value, it should consider its effect on the amount of investment when selecting the fund.
How does the administration rate work?
A. Administration fee This is expressed as an annual percentage of the amount of investment. For example, if a fund has a 2% administration fee per year, according to fund control, it can be reduced to proportion to months or days. The collection of this cost is monthly or in some cases, which can occur daily, which affects the final balance of investment.
How does rate affect investments?
The effect of administration rate Investment of funds It is not instant, but it looks over over time. The administration rate is high, the investor’s net profitability is low, as this rate is discounted from the amount of investment.
It is important to note, when comparing different funds, it is essential to consider not only historical returns, but also Administration feeThe lower rate with a lower rate will have more beneficial performance in the long run. In addition, the administration rate is often high in active management funds, which requires greater analysis complexity and strategic decisions, however Passive funds (As indexed funds) has low costs.
Example
You invest in R $ 100.000 in the background with A. Administration fee 2%per year. Each year, you pay $ 2,000, which will be removed during this period according to the Fund defined frequency (for example monthly). At the end of the year, your investment value is reduced by this rate, which reduces its overall profitability, especially if the fund does not exceed the hopes of the fund.
If the fund’s profitability is 8% per year, its gross returns will be R $ 8.000. However, the administration rate has been reduced by 2% (R $ 2,000), its net return R $ 6.000This indicates a significant difference.
Tips for maintaining administration fee
To reduce the effect of Administration fee In your investments, consider the following strategies:
- Compare fees: Before investing, analyze different funds and their administration rates. It helps to choose a very competitive option with good opportunities for profitability.
- Estimate net profit: Comparing funds, it is important to consider net profitability, that is, the final return after the rate reduction. The fund with a high operating rate may not be beneficial if its net profitability is low.
- Consider passive funds: Passive funds ETFs (Index Funds), usually have fewer administrative rates, which is a good choice for those who seek a more financial way to invest in less volatility and active management.
