We usually apply this wisdom to open-ended funds, but it is equally relevant to the private rented sector. The business of finding reliable tenants and managing repairs is time-consuming and therefore costly - most estimates put it at about 30 per cent of gross rental income (including maintenance costs). Some private landlords do all the work themselves, but over a million rely on letting agents for a full management service.
Monitoring the cost of this service is clearly a key way to improve returns. But it receives remarkably little attention. One reason, I suspect, is the historical reliance of buy-to-let investors on capital rather than rental returns. Over the long property boom of 1995-2007 residential investments came to be seen as a geared play on house prices, not a service provided to tenants in exchange for an income stream.
Another reason is probably regulatory. Fund investors can thank the Financial Services Authority that asset managers are now obliged to publish a total expense ratio (TER) that allows consumers to compare their costs. Letting agents - the equivalent middle men sitting between investors and assets in the private rented sector - are unregulated and charge infamously opaque fees.
This may change. Labour peer Baroness Hayter successfully tabled an amendment in the House of Lords this month that would bring letting and management agents within the scope of the 1979 Estate Agents Act. Passed by a narrow margin - 211 votes to 206 - the amendment will now pass back to the House of Commons to be discussed by MPs.
This debate may not be dogged by the philosophical arguments surrounding press regulation, but its passage through parliament is far from guaranteed. Under pressure from its Neo-Thatcherite wing to boost growth by 'cutting red tape', the Tory-led government is disinclined to introduce statutory regulation for any industry. On the other hand, the amendment is supported by the two other main parties and most property lobbying groups, from the Association of Residential Lettings Agents (ARLA) to homeless charity Shelter, who are otherwise unlikely bedfellows.
ARLA and its peers argue that regulation is needed to stamp out rogue agents that tarnish its reputation. "The problem is that substandard agents go out of business with client money and are very hard to track down," says Valerie Bannister, ARLA vice-president and national property director at letting agent Your Move. Shelter provides a graphic case study of this problem in Abdul Motin, a London landlord who lost £9,000. "The letting agents falsified the tenants' references, withheld the rent and deposit from me, and have now dissolved their company. This has been a living nightmare for me and my family," he told the charity.
However, it is not clear that Baroness Hayter's amendment would actually help victims like Mr Motin. It would not oblige letting agents to hold client money in segregated accounts or insure themselves against professional indemnity - as membership of ARLA does, for example. It would merely force them to sign up to a redress scheme managed by an ombudsman.
Critics of the mooted reform therefore argue that it does not go far enough and may diffuse moves towards tighter regulation. These include the National Landlords Association (NLA), the UK's largest support group for private landlords. "Redress is important, but it's much more important that letting agents have proper processes for dealing with client money," says NLA chief executive Richard Lambert. Shockingly, many agents still use the rental income from the properties they manage as working capital.
There are two explanations for the apparent timidity of the proposed regulation. First, nobody - least of all the Conservative party - wants to be accused of saddling small businesses with more costs. Second, the political impetus behind the amendment came from a desire to protect the country's swelling ranks of private tenants, who now include both young professionals without access to mortgage finance and benefit claimants without access to social housing. The interests of landlords, who have more to gain from tighter financial regulation, were discussed during the House of Lords debate on 6 March - but clearly as a second priority.
An optimistic reading of the amendment is that it is a foot in the door. Landlords may hope that strict processes for dealing with their rental income will follow. A more empowered ombudsman might in time be able to push for a consistent pricing regime akin to the TER in fund management. This would be welcome indeed - agents' lax charging practices were much criticised in a recent Office of Fair Trading report.
But none of these things is guaranteed by the current amendment, which may not even pass into statute. For the moment, therefore, landlords should ignore all talk of regulation and continue to treat letting agents - about 40 per cent of which belong to no professional body - with suspicion. Do the fees seem reasonable, given the services demanded? Is the rental income held in a separate account? How long has the company been around?
Only a third of landlords currently check whether their agent belongs to a professional body, according to Baroness Hayter. Yet pressure from picky landlords will be much more effective than regulation in driving up agent standards. Tenants have limited scope to choose an agent - they choose the property first, then call the agent chosen by the landlord. Politicians can help give directions for reform, but it is landlords who really sit in the driving seat. Over to you.
