Exchange traded fund investors have a plethora of options and strategies to gain exposure to the various markets. Nevertheless, people should take the time to consider the associated fees that come with their investments as the costs do add up over time.
Aside from the upfront cost or commission for buying a fund, investors may largely ignore fees altogether, writes Morgan Housel for the Wall Street Journal.
For instance, in a 2013 Limra poll of 741 investors with 401(k)s and other defined-contribution plans, about half replied that they didn’t they were forking over in fees and almost a quarter thought they weren’t paying anything at all.
Investors “have no idea what they’re paying,” Christine Benz, director of personal finance at Chicago-based Morningstar, said in the article.
Moreover, even if an investor knows a fund’s costs in percentage terms, a person rarely pays attention to the actual dollar amount.
“Most investors spend about five minutes with their account statements,” Alison Salka, director of research at Limra, said in the article. “They’re mostly just checking their balance, not going through the details.”