Thursday, March 20, 2008

Annual Fee/Cost & Returns for ETF

Knowledge@Wharton has an article on ETFs

Here are some numbers from the article:
While the average actively managed mutual fund charges investors annual fees of about 1.3% of the amount invested, the Vanguard S&P 500 fund charges just 0.18%. Spyders charge just 0.08%. If the market's annual return averaged 8% a year for 20 years, every $100 invested would grow to $459 in the Spyder, $451 in the Vanguard fund and $366 in the managed fund. The difference: fees' effect on compounding. While managed funds try to offset this disadvantage with good stock picks, many studies have shown that the average manager cannot do this consistently.
We have a few ETFs in India. But the lowest fee is arounf 0.45% compared to 0.08% for the first ETF of the US.

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