Investment expenses have been on my mind this month, as you know, if you’ve read “Morgan Creek Capital’s Yusko on investing,” “Morgan Creek Capital’s Yusko riles up Tweeters with comments on investment fees” or you follow me on Twitter.
This prompted me to revisit my article, “Have mutual fund fees gone up or down? Are they fair or unfair? It depends on whom you ask.”
Many of the points raised in this 2006 article still apply.
- For most advisors, it’s a no-brainer to pick the fund with lower expenses, assuming the fund’s style, market capitalization and other major factors are equal.
- Controversies swirl around several topics related to fees, including their fairness, their correlation with higher fund returns, whether they’re rising or falling, and whether fund firms are responding adequately to advisor demands.
- Some financial advisors say both critics and boosters of mutual funds may be missing the point by focusing on disclosed expense ratios.
- One thing seems clear: Advisors will continue to gravitate toward low-cost funds that also meet their other investment criteria.
One change since my 2006 article: The Investment Company Institute’s research no longer shows that overall mutual fund expenses are dropping. The headline for its latest study says, “Mutual Fund Expense Ratios Ticked Up in 2009, While Total Fees and Expenses Remained Steady.” Morningstar Advisor put a more negative spin on fees in “Mutual Fund Expense Ratios See Biggest Spike Since 2000.”
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