=Real Rate of Return of 5.1% for mutual fund portfolio grows to $444,715
The Difference is over $146,000!!!
The higher expense ratio costs the mutual fund investor $146,000 in value for every $100,000 investment over a 30 year period. In this example the only variation is a 1.0% difference in the expense ratio. Pretty amazing, right!!
Investors should consider these facts before buying investment vehicles. Thirty years ago mutual funds were a good option for investors, but times have changed. Commissions on buying stocks and bonds have fallen over 90%. In addition, the advantages of investing in exchange traded funds (ETFs) include many of the advantages of mutual funds, but usually at a lower cost.
A high mutual fund expense ratio will hurt investment performance and should cause investors to consider self directed investing. Investing in a combination of individual stocks and ETFs can lower expenses and save hundreds of thousands of dollars over a lifetime.
This article was republished with permission from Arbor Investment Planner.