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Beware risks of opting for the wrong fund

You could pay a high price for choosing the right investment house but picking the wrong fund - losing out on more than £8,000.

Many investors are sucked in by big-name fund managers such as Fidelity, Jupiter and Schroder. While many of their top funds are some of the best around. This does not mean that all their funds will produce similar returns.

Take Fidelity - the world's biggest investment house. One of it's fund managers Anthony Bolton is among the most powerful men in the City and his £5bn Special Situations fund has achieved performance that few can beat.

According to Moneyspider, a website which rates more than 2,000 funds according to its own criteria. Fidelity's best fund over five years is its European fund. A £5,000 investment would be worth £7,915.

But if you had put the same lump sum in Fidelity American Growth it would be worth just £2,408 - you would have lost out by £5,507.

Moneyspider managing director Bill Ross says: 'The big managers persuade people to but their funds off the back of the performance of their best funds. But clearly not all their funds do as well. You need to look beyond the brand and focus on the individual fund.'

Moneyspider uses a sophisticated rating system, which blends performance over one, three and five years. It also factors in the FTSE 100 performance, and what your money would be worth if it had been held in cash, to give an alphabetical rating.

The most costly would have been if you had picked the worst fund, not the best, from Jupiter. Its Financial Opportunities has returned 90pc over five years. A £5,000 investment would be worth £9,495. But its turkey fund Jupiter Global Technology has lost almost 75pc during that time. If you picked this one, lured in by Jupiter's branding, you would have lost out by a staggering £8,232 compared to its best fund.

One of the most aggressive advertisers of the ISA funds is New Star. Picking the wrong fund in its stable would have cost you dearly - £6,630 to be exact.

In this case the New Star Pacific concentrates on Asia but includes Japan - turned £5,000 into £7,670. But the New Star Technology funds lost almost 80pc of its value to turn £5,000 into a paltry £1,020 over half a decade.

Sadly it is a similar story across all major investment houses including M&G and Invesco Perpetual. Among the top fund managers M&G had the smallest difference between its best and worst funds (Global Basics and US High Yield Corporate Bond) but even this came to £3,875.