NEW YORK — All of Wall Street’s big recent swings show again how little investors control. When it comes to tariffs, inflation or how much profit Big Tech companies make, investors have very little sway.
That’s why it pays to exert control where possible, and for investors, that means keeping expenses in check. When the S&P 500 loses 2% anyway, why lose more by owning a mutual fund or exchange-traded fund that tries to mimic it and then tacks on higher fees to do so?
Fortunately for investors, finding lower-fee funds has become easier every year as the industry feels pressure to compete for investors. Across all U.S. stock mutual funds, investors are paying about 42 cents in fees for every $100 invested, according to the latest 2023 data from Investment Company Institute. That’s down by more than half from 99 cents in 2000.
And the momentum is continuing. Earlier this week, fund giant Vanguard said it was reducing expenses across 168 classes of mutual funds and ETFs, calling it the largest fee cut in the company’s nearly 50-year history. The investment firm said the reductions will save its fund investors more than $350 million this year alone.
“Lower costs enable investors to keep more of their returns, and those savings compound over time,” said Salim Ramji, Vanguard’s chief executive officer.
Most funds advertise their fees as something called an expense ratio. It shows what percentage of a fund’s total dollars go toward covering its annual expenses. A lower number is generally better. Most expense ratios will be below 1%, and some funds even boast of zero expense ratios.
Vanguard’s cuts from earlier this week took the expense ratio of its Total International Stock fund ETF down to 0.05% from 0.08%, for example.
