What is an expense ratio and how does it reduce performance? Investors use expense ratio as a major metric to decide on investment products. Expense ratio in a mutual fund is comprised of the investment management fee, a 12b-1 fee, also known as the cost of distribution, and other operating expenses. A shareholder pays the fee on a daily basis through an automatic reduction in the price of a fund. If you invested in an exotic mutual fund with an expense ratio of 2.5%, after 30 years, you would have only $87,550 and paid a whooping $86,944 (almost 50%) in expense fee. Let’s look at another example. If you invested in a fund with an expense ratio of 0.5% (typical for index funds), after 30 years you would have $152,203 and paid a total of $22,291 (or 12.8%) in expenses. So high expense ratios can really hurt your investment performance.
Exchange traded funds or ETFs, as they are known, far eclipse mutual funds for their biggest benefit amongst others, the low expense ratios. Expense ratio for a mutual fund goes beyond 1.5%, while for an index fund is 0.19%, but a typical ETF expense ratio is only as low as 0.13%. What that means is you could simply buy the index with a low-cost ETF and outperform almost all mutual funds over the long term by at le...
... middle of paper ...
...short of spectacular. Invented in 1993, they started with one domestic fund and have since growth to more than 1100 ETFs that track domestic and global indexes, sectors, even alternative investments like water, timber, clean energy and solar. And there are more coming online everyday. The new funds offer long exposure in areas like China, Emerging Markets, the Wilshire Total Market Index and leveraged short exposure in the Russell 3000, DJ Wilshire Total Market and a host of country specific funds like Brazil, Mexico, South Korea and region specific like Latin America, Europe and the Pacific.
Given the flexibility, diverse options, tax and expense advantages, ETFs present an attractive option that every investor should consider for his portfolio, particularly in these difficult times and when 401ks are IRAs are more important than ever to our financial futures.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- System Overview The Lake County Library System consists of an administrative office located in Tavares, nine member libraries, and six branch libraries. Member libraries include: Fruitland Park Library; Helen Lehmann Memorial Library in Montverde; Lady Lake Public Library; Leesburg Public Library; Marianne Beck Memorial Library in Howey-in-the-Hills; Minneola Schoolhouse Library; City of Tavares Public Library; Umatilla Public Library; and the W.T. Bland Public Library in Mount Dora. Branch libraries include: Astor County Library; Cagan Crossings Community Library in the Four Corners area; Cooper Memorial Library in Clermont; East Lake County Library in Sorrento; Marion Baysinger Memorial C... [tags: System Overview]
1892 words (5.4 pages)
- Relocation is always an exciting experience and a challenge to the people who have no knowledge about the deployed country. Therefore, we are happy to provide any assistance for your upcoming journey. This article is aim to provide information of Singapore to help you gain your knowledge before your arrival. It includes brief introduction and some suggestions. We hope you may find it useful. History Singapore, strategically situated at the Southern tip of the Malayan Peninsula, between Malaysia and Indonesia, is an island city state with 714 sq km.... [tags: Country Overview, Geography]
1774 words (5.1 pages)
- 1a. Present an overview of the evidence for determining the date of the writing of Acts. Most scholars put the date of Acts in a range of three periods. Some scholars believe Acts dates back to 62-70, 80-95, or 115-130. (D. A.Carson & Moo 2005:296 ). However, the date of the writing is linked with the date for the writing of the Gospel of Luke. It is believed that Acts was written in the early sixties. Contributing factor of this date is the abrupt ending of Acts. Luke’s abrupt ending of Acts could be attributed to Paul’s imprisonment.... [tags: Scripture Analysis ]
541 words (1.5 pages)
- Los Angeles County Department of Public Social Services has been struggling to accomplish a well organized computer system that was supposed to minimize the work of the employees, minimize the consumption of paper, decrease the number of errors and make the service for the customer faster. The bid for a newer, innovative and technological system began at $1 million dollars in 1995 (www.articles.com) . Many contractors sought the opportunity to make the County's dream come true. In this paper, I will attempt to describe a proposed project that will enable the County to fulfill the need for a faster service, more accurate, cutting unnecessary paper work for the employees and the lowest p... [tags: Project Overview Los Angeles Social Services]
1597 words (4.6 pages)
- It's no news to anyone that's reading this that the meteoric rise of the Internet in recent years has significantly increased the availability of all forms of media. Nowhere is this more obvious than in the realm of commercial musical recordings, where Napster and other internet-based distribution systems have made incredible volumes of musical content widely available, all without the consent of the music's originators. This situation, though, is not unique to the music industry, as photographers, filmmakers, and other content-originators all have the same problem to varying degrees.... [tags: Technology Media Essa]
3114 words (8.9 pages)
- Overview of the Olympics The Olympic Games are an international sports competition. In the Olympics, athletes play in many types of games. Some athletes compete in the Summer Olympics. Some compete in the Summer Olympics. The Olympic Games are very old and have a very interesting history. The first Olympic Games were held in Greece in ancient times. They probably began in the sixth century B.C. The contests are held every four years in the summer. The first games lasted for only one day. There was only one contest.... [tags: Sports History Athletics Essays]
578 words (1.7 pages)
- An Overview of Glass Glass is a very odd substance, is it a solid or a liquid. There are many reasons why it can be considered either of the two, but still most people are unsure of its state. Glass may be a state of matter that is neither solid nor liquid. A liquid has viscosity, which is a measure of its resistance to flow. So water may move very quickly because it has a high viscosity, but oil has a high viscosity so it moves slower. If something were to have a very high viscosity then it may seem like a solid but it would be an amorphous solid.... [tags: Papers]
525 words (1.5 pages)
- Overview of Learning Learning is perceived differently among society’s population, although the majority of these people have a common understanding on how to measure one’s intellectual abilities. Two important factors come into play when discussing one’s intelligence: one that Bell Hooks talks about which is background and one that Howard Gardner studies which is intelligence. Two tests made to test one’s intellectual abilities are IQ tests and SAT test. These test one’s linguistic intelligence and one’s logical-mathematical intelligence.... [tags: Learn Science Essays]
1664 words (4.8 pages)
- Curriculum Overvie w When children are getting ready for their first day of school, they have no idea what is in store for them. Their mom’s and dad’s take them to get their first school supplies and new backpacks. What they don’t realize is that at the same time, their soon-to-be teachers are making the curriculums for the upcoming school year. When the word curriculum is used people have a general idea of what it means, but there has never been an agreed upon definition of the word. It has been said “Educational practitioners, theorists, and researchers have used the term curriculum in various ways, with no definitions universally accepted.... [tags: essays papers]
2941 words (8.4 pages)
- Angelic Overview ANGELIC OVERVIEW: "Angels are spirits," proclaimed St. Augustine. St. Thomas Aquinas believed that angels were pure spirit, having no matter or mass, and taking up no space; but Thomas believed angels could assume bodies at will. The purpose of angels is the same as mankind: to love and serve the Lord. However, being that angels are not material beings, and possibly from a different dimension, they can serve the Lord in many different ways. Angels have far greater will and intellect than we have.... [tags: social issues]
2231 words (6.4 pages)