When it comes to mutual fund performance, you don't get what you pay for. In fact, according to a recent study by Morningstar, the less you pay for your fund, that better that fund is likely to perform.
Of domestic stock funds, 47% in the cheapest quintile succeeded in beating the category average over a ten year period, 33% in the next quintile, 30% in the following quintile, 27% in the next and just 19% in the costliest quintile. Or in other words, you are over twice more likely to beat the category average if you are in a low cost fund than in an expensive fund. The success disparity was also similar for other fund categories. For foreign stocks the probability of category out-performance between the low cost funds versus high cost funds was 40% to 18%, for taxable bond funds this was 48% and 7%; 49% and 9% in municipal bonds."
Pay Less, Make More
When it comes to mutual fund performance, you don't get what you pay for. In fact, according to a recent study by Morningstar, the less you pay for your fund, that better that fund is likely to perform.
Of domestic stock funds, 47% in the cheapest quintile succeeded in beating the category average over a ten year period, 33% in the next quintile, 30% in the following quintile, 27% in the next and just 19% in the costliest quintile. Or in other words, you are over twice more likely to beat the category average if you are in a low cost fund than in an expensive fund. The success disparity was also similar for other fund categories. For foreign stocks the probability of category out-performance between the low cost funds versus high cost funds was 40% to 18%, for taxable bond funds this was 48% and 7%; 49% and 9% in municipal bonds."
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