The point is: costs add up. Big time. Baldwin cautions investors to keep an eye on cost ratios no matter when you want to enter a market. If you spend half a percentage point a year too much on managing your money, you may drain away 14% in 30 years because of compounding.
Meanwhile, there’s a bit of a dispute over what the actual average mutual fund expense ration might be. The Investment Company Institute (ICI) pegs it at 1.17% per year for stock funds, but investing site kaChing says it’s a much higher 3.37%. Both sites have a vested interest in the answer to the question, says Ian Salisbury for The Wall Street Journal. The ICI has a mission to defend mutual funds from criticism, while kaChing’s service competes with mutual funds.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.