“This is no surprise,” Gina Miller, co-founder of SCM Private, said in the article. “Costs are the biggest eroder of returns so the cheaper the fund, the more of the returns will end up in investors’ pockets.”
Moreover, Miller warns against so-called closet trackers, or active managers who charge high fees for basically following a passive indexing strategy.
Along with factoring in the fees, more investors are turning to beta-index ETFs as many actively managed funds fall short of their benchmarks. According to the latest S&P Indices Versus Active Funds, most active managers fail to produce alpha over the long term three- and five-year horizons. [Poor SPIVA Scorecard Highlights Appeal of Index ETFs]
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.