There's a portion at the end of every mutual fund's annual report that, if you read it closely, just might change your view on “fees,” or, more appropriately, mutual fund operating costs (commonly called the “expense ratio”). But before I get to that, let's review the game everyone plays when it comes to fees.
Fees are bad. Retirement savers pay too much in fees. Why, did you know that several white papers even say ordinary workers will lose anywhere from $150,000 to more than a quarter-million dollars? That's maybe a third or more of their earnings. All lost to those terrible fees.
Only, the bulk of these “fees” consist of mutual fund operating costs. One widely quoted study even includes “trading” expenses (i.e., brokerage commissions incurred when buying and selling underlying securities within the mutual fund's portfolio). Here's the too-often-ignored mathematical reality: Mutual fund returns already incorporate both brokerage commissions and expense ratios.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
