He likens the mutual fund industry today to what the tobacco industry was in the 1940’s. “They made you believe that smoking is healthy, but it’s really a slow, insidious process of killing people. We’re really trying to get people to open their eyes to this and put the numbers in their face.” [ETF Portfolio-Building Basics.]
Investors have the power to protest high fees by voting with their feet, he says, by taking their money out of mutual funds and managing their own low-cost ETF portfolios. “It’s gotten really easy to do it; [not long ago]you couldn’t manage your own globally diversified portfolio, but today you can.”
It’s only fair to note that not all ETFs are cheaper than all mutual funds. Whatever your investment of choice may be, this study underscores the importance of paying attention to expense ratios and understanding how seemingly tiny amounts of money add up to big bucks in the long run. It’s imperative to always understand what you’re paying and take any necessary steps to slash costs when you can. [ETFs vs. Index Funds.]
It’s also worth noting that if you’re a buy-and-hold investor, you’re going to lose money in bear markets whether you’re holding ETFs or mutual funds. [Why Buy-and-Hold is Dead.]
Small amounts really do add up.
Read MarketRiders’ full study here.
For more stories about ETFs, visit our ETF 101 category.
Sumin Kim contributed to this article.