A 401(k) Must Read: Mutual Fund Expense Ratio Myth Busted

The usual debate about fees charged by mutual funds is about whether to use passive or active funds. The argument for passive funds is that very few active funds beat their benchmark, so why pay more? This may lead to the conclusion that lower-cost funds perform better. Christopher Carosa of Fiduciary News compares whether lower-cost passive funds fare better than higher-cost passive funds, and then does the same for active investments. His conclusion: While expense ratios may be important when conducting due diligence on index funds, they may be less important — and even misleading — in actively managed funds. Read more here.

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