What's the difference between these two S&P 500 index funds? They both track the same index. They invest in exactly the same companies. They both are passively managed. So what might cause their dramatic difference in performance over the last decade? Simply, the amount of money they charge investors. The industry calls this fee their "expense ratio." If you had invested $100,000 in the most expensive S&P 500 index fund 10-years ago vs. the investing in one of the lowest cost S&P 500 index fund 10-years ago, you'd have $60,000 less. Let that sink in. $60,000 LESS. Again, these funds invest in the exact same companies. You simply paid more money for investing in the exact same companies, and in the end, the fund company kept more money and you earned less. Fees matter.
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AuthorPaul R. Rossi, CFA Past Articles
January 2021
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