Why Mutual Fund Costs Are a Lot Bigger Than They Seem
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The average actively managed fund doesn't look expensive—what's 1.3% per year? A lot, says Charley Ellis, founder of financial consulting firm Greenwich Associates.
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Think of expenses as a share of your expected returns. If long-run history repeats and stocks grow 10% a year, then 1.3% is 13% of that. And if stocks falter, you would give up an even bigger percentage of any gains to the fund manager.