Costs and Performance

Costs have a dramatic impact that the cost of an investment has on portfolio returns over time.

Costs, Did you know . . . .

• The cost of an index fund is on average 1/10 that of an actively managed fund.
• Index funds have regularly produced rates of return exceeding those of actively
  managed funds by more than 1.5%.
• The underperformance of managed funds is primarily because of the management
  fees and the trading costs, and the compounding negative impact that they have on returns.

Performance, Did you know . . . .

• The average actively managed fund has done no better than an unmanaged broad stock index.
• Actively managed funds may have very good records over short time periods, but there is
  generally no consistency to superior performance.
• As a result it is impossible to predict in advance how any one fund will perform over the long term.

Source : A Random Walk Down Wall Street ( 9th Edition ) Burton G. Malkiel / WW Norton and Company Inc 2007