CRYPTIC ADVICE DOESN’T GIVE THE FULL PICTURE
By Andró Griessel
4 October 2025
Walking is cheaper than cycling, cycling is cheaper than driving, and driving is cheaper than flying.
If the cost of your journey is the most important factor, it’s logical to go on foot. But if speed or distance matters more, you’ll need alternatives – and focusing too much on cost may keep you from reaching your destination.
I often see financial commentators (known as “finfluencers” on social media) referring to charts like the one accompanying this article with the message that “fees make you poor” and that expensive investment products must be avoided at all costs in favour of cheap passive funds tracking an index. This is especially popular in the context of offshore equities, with references to products such as the Satrix MSCI World Index, and locally to the Satrix ALSI or Satrix Top 40.
As with most well‑intentioned advice, there is a meaningful element of truth here, and I have no quarrel with these influencers or the providers of the index funds mentioned.
My colleagues and I have written extensively about the long‑term impact of an extra 1% or 2% growth and why eliminating unnecessary costs in your investment structures is crucial.
You may now be wondering what my point is.
Focus on net growth
Short online posts or 30‑second videos may convey a headline idea, but they are entirely inadequate for explaining the full story. The person sharing the message has no insight into who is receiving it, and they also lack the chance to clarify uncertainties or check whether the audience is running off with half-truths.
As a result, many DIY investors attempt the Johannesburg trip on foot because it sounded like a good idea.
What matters is the net growth you keep after costs. That is what determines how far or how fast your money will go – not the size of the fee you paid.
Below are four funds managed by the same well‑known South African asset manager.
Current fees:
- Fund A: 0.29%
- Fund B: 1.62%
- Fund C: 1.72%
- Fund D: 1.92%
From a cost perspective, Fund A may seem like the homecoming queen and Fund D the class clown. But it won’t surprise most readers that the most expensive fund (even after fees) was by far the better choice over the past 24 years.
You might say this is not an apples‑to‑apples comparison, and you’d be right.
But the fee you pay is far less important than the net return you ultimately earn. The influencer’s intention was to show that an expensive fund manager who cannot beat their benchmark is harmful to your wealth, in which case you should consider an index fund.
This advice is easier to apply in offshore equity markets than in South Africa. In the example above, the far cheaper index option would have delivered “only” R25.4 million compared to R31.2 million.
One of the investment strategies I personally use shows an all‑in fee of 5.25%.
Hedge funds
You may ask who in their right mind would invest in a fund with such astronomical fees. My answer: someone who understands that net‑of‑fee performance, not the fee level, drives long‑term wealth creation.
It is an investment in a hedge fund. These funds are known for exceptionally high fees. One of the building blocks of this strategy currently charges 7.77% per year. Yet someone who invested R100 000 in February 2000 would today have roughly R19.2 million, compared to around R2.1 million if they could have invested in the JSE All Share Index at zero cost.
Before these eye‑watering returns lead readers astray, note that many factors are hidden within long‑term performance numbers.
In summary:
- Fees can only be assessed in context. Low fees are not automatically favourable, and high fees are not automatically unfavourable.
- What matters most is net return after fees.
- High fees do not necessarily imply high risk. Hedge funds are a good example.
- If you pay for active management but the fund fails to outperform a passive index over sufficiently long periods after fees, you should consider switching to an index‑tracking fund.
There is a saying: “Everything should be made as simple as possible, but not simpler.” The same principle applies to the debate on fund fees.
Ask the right questions about fees versus performance before throwing out the baby with the bathwater.
Andró Griessel is a Certified Financial Planner® at Woodland Wealth. Contact him at info@woodlandwealth.co.za.
Although all possible care has been taken in the preparation of this document, the factual correctness of the information contained herein cannot be guaranteed. This document does not constitute advice and anyone who intends to take any financial action based on this document is strongly advised to first consult with his/her personal financial advisor. Woodland Wealth is an authorized financial service provider with FSP no. 5966.