Investors paid less to own funds in 2018 than ever before. Morningstar's annual fee study of U.S. open-end mutual funds and exchange-traded funds found that the asset-weighted average expense ratio was 0.48% in 2018, a 6% decline from 2017. This is the second-largest year-over-year percentage decline we have recorded since we began tracking the trend in asset-weighted average fees in 2000. Consequently, we estimate that investors saved roughly $5.5 billion in fund expenses in 2018 compared with 2017 fee levels. This fee decline is a big positive for investors because fees compound over time and diminish returns.
In this study, we used the asset-weighted average expense ratio to examine the trend in mutual fund expenses paid by investors. The asset-weighted average is a better measure than an equal-weighted average as it approximates what investors paid for the funds they invested in rather than what funds charged.