What are your fund fees? If you don’t know, you should. Fund fees can impact your return over time. Luckily, they’re going down.
Fees Are Falling
A recent industrywide review by the Morningstar fund research organization found that, on an equal-weighted basis investors pay an average fee of 1.10% a year in actively-managed U.S. equity funds, down from 1.21% in 2015. Investors in passively-managed U.S. equity funds (including ETFs) paid an average of 0.49% a year, down from 0.62% in 2015. Actively-managed international stock fund costs came down from 1.39% to 1.22% over the same time period; for passively-managed funds, the drop was from 0.60% to 0.49%. Overall, for all fundsâ€”including taxable and municipal bond funds, commodities and alternative fundsâ€”the weighted average for active managers came to 1.08% a year (down from 1.20% in 2015) compared with 0.61% (down from 0.72%) for passive funds.
Morningstar predicts that fund fees in both active and passive categories will continue to drift lower, as consumers and advisors put their money into increasingly less expensive funds. And it notes that there are now a handful of zero-fee index mutual funds and ETFs.
If you don’t know how much you’re paying for your funds, you should. You can find them at Morningstar.com, or in the prospectus. These fees can impact your long term performance, which is why many investors are flocking to them.