Fund Spy

2018 Morningstar Fee Study Finds That Fund Prices Continue to Decline

Adam McCullough, CFA

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.