Boomer investors know better than most. They understand that no one ever said it was going to be easy being an investor. Mutual Funds, the mainstay of our 401(k) retirement plans and IRAs are no different than any other investment. They offer numerous layers, a multitude of nuances and of course, risk. And despite all of the information floating out in the public domain, the ability to tell one fund from the other is still difficult.
So the question is: Can you do the mathematical calculations required to find out how much your mutual fund is going to cost you? Chances are you might say yes, if you consider yourself a very savvy investor, able to filter all of the costs in the prospectus into a final number, understand the tax implications known and as yet unknown, and then be certain that you are right – or as close to right as humanly possible.
But chances are you can’t. Instead you fall squarely into the camp of investors who either have no clue or look at one guiding number and the vast majority of you are 401(k) or IRA investors as well. That number, widely advertised by the one group that lobbies in favor of mutual funds, Investment Company Institute or ICI comes in at an average of about 1.17% for all actively managed funds.
Most financial professionals, understanding that this is the average, suggest it as the top any client or interested investor should pay for the privilege of a little more risk than a simple index provides. Some also understand that this is more a moving target and unless they raise the cap to 1.5% as the max, they may exclude some of the better performing funds in the investment world, even at a slightly higher price.
Read the full article from Target2025.com on mutual fund math.