Long-term investors have an option to cut their costs – exchange traded funds (ETFs). Back in time, mutual funds were the best option for diversifying long-term holdings – the predominance of mutual funds in 401(k) plans is an example.  With these funds were came high expenses.  Until recently, fund firms have made heaps of money from hidden fees and unnecessary services. Michael Mancini of The Motley Fool reports you can now entirely avoid those fees, as there’s a lower-cost ETF to replace any sector or index-based fund imaginable. On occasion, a fund manager is able to beat the index, but most can’t, even before you subtract fund expenses. Especially in declining markets, mutual funds’ higher expenses really can be felt- something you may not notice in a bull market.  And there is more talk of including ETFs in more 401(k) plans.

Tags: 401(k)