The case for low-cost investing is stronger in a world of low expected returns and increasing sophistication, and index funds and exchange-traded funds are a great way to keep expenses to a minimum.
The financial crisis and its echoes have led many investors to revise their investment strategies. The two major thrusts among institutional investors have been either to search harder for funds that may outperform or to hold more low-cost index funds. Most investors and advisors will be better off adopting the low-cost approach as the quest for a shrinking market-beating pie becomes more brutal and the penalty for mistakes becomes even steeper. ETFs and other passive vehicles are great ways for investors to earn a fair share of the slower-growing market pie.
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Michael Rawson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.