Birgit Kuester January 21, 2020 Mutual Fund
READ CLOSELY: How do all these fund costs affect you? Well, with the expense ratio which averages 1.6% per year, sales charges 0.5%, turnover generated portfolio transactions costs 0.7%, and opportunity costs - when funds hold cash rather than remain fully invested in stocks - 0.3%. The average mutual fund investor loses 3.1% of their investment returns to these costs each and every year. While this might not seem like much on the surface, costs would consume 31% of a 10% market return. Add in the 1.5% capital gains tax bill that the average fund investor pays each year, and that figure shoots up to 46%, nearly half of a potential 10% return. Do you feel like you are taking one or two steps back while trying to go forward yet?
Ask you financial adviser to show you the fund ratings or do your own research if they will not. Otherwise find yourself a good Fee-Only financial adviser that gets paid to provide you with these top fund choices and help you invest in the "best of the best" no-load funds without any conflicts of interest.
Along with the increased buying and selling activities of an active manager comes a higher expense charge for those trading and management costs. Most actively managed funds have a 50 to 100% higher operating expense ratio than the average index fund. If you are not getting better returns, this can cost plenty over time. Also if your quality manager leaves the fund, you may need to find a better alternative.
These are just two of several companies that provide ratings on these funds. Research them and take the time to evaluate the past performance before going with one of these companies for investment advice. When you rely on fund ratings to provide the needed investment information you should be sure to look at more than one ratings system. You want to follow the ratings company that has the most successful record of predicting the future potential of mutual funds.