In case there was any doubt, Morningstar has settled the debate about the best predictor of a mutual fund’s future success. Perhaps you thought the funds with the most stars from Morningstar would shine brightest. Alas, this is not the case.
Morningstar’s research indicates the lower a fund’s fees, the better its performance. The findings were outlined in an article in The Wall Street Journal on August 9, 2010, “Low Fees Outshine Fund Star System.” This information should further motivate investors who are looking for ways to pick up the pieces from the recent stock market swoon.
Why do funds with lower fees perform better over time? Because funds that charge less leave more for their shareholders.
We know that actively managed funds charge more than passively managed funds. We also know that most of them underperform the market.
So, intelligent investors buy low cost, passively managed funds. As a result, they end up with more in their coffers
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