I have been either very busy serving clients or out of the country for the past several weeks. So, for those of you who read my blog, that explains my absence.
I read an article in this weekend's Wall Street Journal titled, "Why Fund Fees Barely Budge." You can find it here: http://online.wsj.com/article/SB10001424052970203911804576651512398417294.html?KEYWORDS=fund+fees
The article notes that actively managed mutual funds charge an average expense ratio of 1.45%. In contrast, my firm's model portfolios have an expense ratio that averages about 0.25%.
But this is not the only expense incurred by mutual fund investors. Funds pay brokerage expenses and bid-ask spreads when they buy and sell for the fund. The article notes that actively managed mutual funds incur an average of 1.44% of trading costs annually.
Investors should keep these expenses in mind when they think about investing in actively managed funds. The active fund manager has to generate returns in excess of these fees in order for investors to experience returns that are better than the market itself.
