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The Short Answer

Don't Discount Value of Low Fees Over the Long Term

Small differences in expense ratios can mean big bucks down the road.

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Question: I keep hearing how important it is to watch fees associated with my mutual funds. Because fees are incorporated into performance, isn't my bottom-line return what really matters?

Answer: Although you're right that bottom-line return is ultimately what matters most to investors, don't overlook the role fees play in that return. Many investors look at expense ratios charged by funds, see a small number--often less than a percentage point--and assume it hardly matters whether a fund charges a quarter of a point or a full point. But although this small difference might not look like much in percentage terms, over the long haul it can make a dramatic difference in the amount of fees you pay and, ultimately, your bottom-line return, as we'll see in a moment.

Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.