Question 5

Question 5: I have been told there are a number of costs associated with finance and investment. Can you advise me of any such costs and any traps to be aware of?

A. Costs with finance inlcude fees, interest rates and incentive schemes.

Costs with investing include brokerage, entry and exit costs, management fees and taxation.

To avoid the traps associated with these costs, here are some aspects to take into consideration,

Fees: you should compare fees with other fees to find the one most suitable to you

Interest rates: like fees, you should investigate and compare interest rates to find the one that is most suitable for you

Incentive schemes: It is important to read the fine print of incentive schemes to know which conditions apply to the deals

Brokerage: a brokerage fee is charged when an investor buys or sells shares through a stock broker

Entry & Exit costs: with most investments there are entry and exit costs to it

Management fees: When investing in a managed funds, management fees are charged

Taxation: Taxation must be paid on interest earned from investments, capital gains made on investments and for unfranked dividends

(Source: Accounting Concepts and Applications 4th edition, Phillipa Greig, Joan Mackay, Stacey Beaumont, Rosette Sanger, 2008)