WHY COSTS & CHARGES MATTER

All index tracker funds track a broad market index. There is no manual intervention of what shares to include or exclude. It is done automatically with no human intervention.

Hence, the only differentiator is how much the company charges the investor to run their automatic tracker machines.

The more they charge, the less the investor receives as return on their investment.

If the investor is charged 1% while the index fund is returning 4%, then the real return to the investor is (4% - 1%) = 3%.

While 1% may not look like much, in terms of returns it is worthwhile noting that 25% of the market return is being taken by the company (1% / 4% = 25%).

Very few companies will highlight the fact that charges will diminish returns for all investors. Keeping them low is key. 

Higher charges does not automatically equal higher quality. The market index fund like FTSE All Share or S&P 500 tracks every share in the market based on their weighted average.

No one is actively trying to balance the proportion of shares in that index; a computer is crunching out the proportions.

Therefore, higher charges and fees do not translate into better value for investors - often, it is the opposite. 

The above is a famous saying by John "Jack" Bogle, the founder of Vanguard Asset Management.

Whatever fees and charges that are not paid, come back to the investor as better returns.

It is imperative that if an investor is going for index funds that they intend to buy and hold for a long period of time, they choose the lowest costs available in the market.