The share market is by far the best place to have your money invested over the long term.
The problem is that there is a cost to do any sort of investing. If you invest in any ASX-listed share you will need to pay for the brokerage.
If you buy an investment that is managed then you will be charged an annual management fee and perhaps an outperformance fee if the manager beats the benchmark.
Unlisted investments can also cost you when you buy into and sell out of the investment. This is called the buy and sell spread and is equivalent to paying for the brokerage.
A lot of active managers charge investors at least a 1% management fee per annum. This can have a compounding effect of reducing returns.
If investment returns between two options are similar before fees then you want to choose the investment with the lowest fees. Options like the Vanguard US Total Market Shares Index ETF (ASX: VTS), Australian Foundation Investment Co. Ltd. (ASX: AFI) and iShares S&P 500 ETF (ASX: IVV) all have very low costs.
Fund managers such as Perpetual Limited (ASX: PPT), Platinum Asset Management Limited (ASX: PTM) and BT Investment Management Ltd (ASX: BTT) all have to achieve returns in excess of the market after fees in order to justify their higher fees. Perhaps if the Australian economy were to falter then individual stock pickers would have a much stronger result.
I am very impressed with one particular fund manager who manages to beat the market over medium-term and long-term time periods no matter what the market does. WAM Research Limited (ASX: WAX) is one of those listed investment companies.
Foolish takeaway
I think the best way to simultaneously achieve market-beating returns whilst having low fees is to invest in shares yourself. Focus on shares you can see yourself holding for more than five years.
Shares that could be great ones to hold for the long-term are Challenger Ltd (ASX: CGF), Ramsay Health Care Limited (ASX: RHC) and InvoCare Limited (ASX: IVC).
