The Hidden Costs of Mutual Funds

According to the Wall Street Journal, the average U.S. stock mutual fund has an expense ratio of 1.31%. Investors pay these fees to compensate a mutual fund manager and cover operating expenses. However, the expense ratio isn’t the only fee investors must pay when owning a mutual fund. Trading costs, which aren’t required to be reported and can be nearly impossible to identify also weight down investment performance in mutual funds. In fact, recent studies indicate that the average stock mutual fund incurs an additional 1.44% in trading costs, bringing the total cost of investing in the average mutual fund to 2.75%!

That’s right. The average mutual fund must earn 2.75% per year to simply break even. So what other options do you have? The “Best Stocks, Best Funds” investment strategy offered by Net Worth Advisory Group rarely costs more than 1.5%, and can be as low as 1%, depending on the amount of assets invested. This fee is all-inclusive, and covers not only all investment and trading costs, but includes the services of a full-time financial planner. A comprehensive financial plan, including retirement planning, portfolio management, estate planning, and an insurance analysis is also covered by this fee. Further, our financial advisors will meet with you at least every six months to update your financial plan, review investment performance, and answer your questions.

What sounds like the better deal: investing 2.75% for an average mutual fund, or paying 1.5% to have a custom built portfolio developed by a full-time financial planning professional who will be in your corner to answer questions and deal with issues that come up? Call to schedule a complimentary consultation.

For more information on fees and the trade-off between mutual funds and the services provided by Net Worth Advisory Group, click here.