A version of this article was published in the March 2017 issue of Morningstar ETFInvestor. Download a complimentary copy of ETFInvestor here.
Fund fees command a lot of attention, and rightfully so. They are, after all, the most reliable estimator of a fund’s return prospects. As Vanguard founder Jack Bogle has said time and again, “In investing, you get what you don’t pay for.” But that doesn’t mean investors should select funds based solely on fees. There are numerous factors that should be taken into account when choosing funds. These include the skills, experience, and structure of the fund’s management team, the process they employ (which is largely dictated by an index methodology in the case of most index funds and exchange-traded funds), and whether the fund’s sponsor is a sound steward of shareholders’ capital, amongst others. It can also be useful to take a more holistic approach to assessing fees. Here, I will explore a different approach to framing fund fees, one that looks not just at how much you’re paying, but also what you’re getting.
Ben Johnson, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.