Among similar funds, prefer the one with lower fees

Top value
Evidence C
Saves money
Free
Takes minutes
No willpower

In plain words

For every 1 percentage point higher in the yearly fee rate, you end up with about 18% less after 20 years and about 26% less after 30 years. Picking the lower-fee fund within the same category is the one thing here that you can know for sure in advance.

Cost: Free. Before buying, take one more look at what the three items "management fee + custody fee + sales service fee" add up to.
What you get: Fee differences eat into the principal bit by bit through compounding, which means the small amount taken each year piles up year after year. With a yearly fee 1 percentage point higher, the final value after 20 years is lower by 0.99^20 ≈ 18.2%, where the final value is the money left in the account by then; after 30 years it is lower by about 26%. Starting in 2023, China has been carrying out a public fund fee reform (公募基金费率改革) that lowered the fee caps on actively managed equity funds (the kind that mainly buy stocks, with a fund manager picking them). From July 7, 2023, newly registered funds of this kind have a management fee rate of no more than 1.2% and a custody fee rate of no more than 0.2%. 136 fund companies also cut these two fees on their older products to below this line
Notes: This calculation is just worked out from a formula, on the premise that the two funds earn the same amount before fees. In practice you also have to count subscription fees, redemption fees, and the sales service fee on Class C shares. This is not investment advice.
Evidence grade: C : The author's experience or common practice, without direct literature.
Sources: 中国证监会 (2023). 证监会有关部门负责人就公募基金费率改革答记者问. http://www.csrc.gov.cn/csrc/c100028/c7418692/content.shtml
厦门证监局 (2024). 「新注册的主动权益类基金统一执行"管理费率不超过1.2%、托管费率不超过0.2%"的上限标准」. http://www.csrc.gov.cn/xiamen/c105636/c7511608/content.shtml
Fama EF, French KR (2010). 见第 11 条. https://doi.org/10.1111/j.1540-6261.2010.01598.x

Mentioned in

If you pay individual income tax at a rate of 10% or higher, open a personal pension account (个人养老金账户), where up to 12000 CNY a year can be deducted before tax; it is not worth it if you pay no income tax or your rate is only 3%

Translated from the Chinese original. Original book, section 5, tip 18. This section is about money and spending. It is general information, not financial or investment advice. Content may be out of date and rules differ by place. When you actually deal with an agency, a doctor or a court, follow what local officials, doctors and lawyers tell you. Disclaimer