For example, Vanguard calculates that if a 25-year-old hypothetical investor allocated 9% of a $30,000 starting salary to a fund with a 1.25% expense ratio, the investor would be about $100,000 behind someone who invested in a portfolio with an expense ratio of 0.25%. The investor essentially forgoes 20% of a portfolio’s value over 40 years. [How ETFs and Mutual Funds are Different]
“The missed opportunity for investors is that a couple of basis points may not seem significant on the surface,” Buckley added, “but, in the words of Benjamin Franklin, ‘a small leak will sink a great ship.’”
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Max Chen contributed to this article.