Monday, July 04, 2005

Controling Mutual Fund Fees.

Costs matter: Wall Street made $350 billion from investors in 2004, according to John Bogle, founder of mutual fund giant Vanguard Group and a leading critic of the mutual fund industry.

Mutual funds collect fees levied against assets under management. As fund managers gather more assets, they make more money, whether you receive any benefit or not.

"Fees are always up," Bogle said "Costs (to investors) permeate the industry."

A typical S&P 500 index fund generated annual returns of 13 percent from 1983 through 2003. But the typical investor in such a fund earned just 6.3 percent because of fees and faulty market timing, Bogle calculates.

The good news is the awareness of fees has risen, especially among financial advisers and investors in stock index funds, money market funds and bond funds — funds where fees have the greatest impact on results, Bogle said. Unfortunately, he said, the costs of trading securities in mutual funds are not properly disclosed. "In any fund, it's a big thing."

One way to control costs is to hire a fee-based financial adviser to search for low-cost mutual funds. If the adviser's fee plus the fees charged by the funds are less than the average mutual fund fee, you're winning the fee game, said Bogle. 2/business/doc42c5a29f833c9461564077.txt


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