Don't Just Choose a Fund Based on Fees

By Todd Rosenbluth, CFRA

Last week, Vanguard continued its tradition of lowering the expense ratio of its index-based mutual funds and ETFs with the fee reduction of several dozen equity, fixed income and asset allocation funds across various share classes; Vanguard also reported one portfolio has a fee increase. Read more http://prn.to/2qmVwoH

CFRA expects the variety of lower-cost passive products will further cause investors and advisors to shift money away from actively managed funds, in light of the performance challenges. In the three-year period ended 2016 just 7% of active large-cap mutual funds outperformed the S&P 500 index.

Year to date through April, Lipper large-cap core mutual funds were behind the S&P 500 index by 52 basis points.

Overall, fee compression is worth applauding as the more money being put to work into investor portfolios will help them better achieve their long-term goals. For example, Vanguard trimmed the fee for its S&P 500 index products, Vanguard 500 Index; Admiral class (VFIAX 218 ****) and Vanguard 500 Index: ETF (VOO) by one basis point to 0.04% and it will enable shareholders to better replicate the performance of the large-cap index.