Why are mutual fund companies with high expenses still around?
Question by J.: Why are mutual fund companies with high expenses still around?
I’ve noticed that there are numerous, numerous mutual fund companies that have funds with expense ratios exceeding 2, 3, and even 4 percent. With fund companies like Vanguard and Fidelity offering funds with expeses that are a fraction of that, why are people still investing in high-expense funds?
Best answer:
Answer by chatsplas
Because investors don’t do their homework
Add your own answer in the comments!
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Comments
One would expect (at least hope) that companies that have the higher expense ratios are doing more research and consequently that research yields information that leads to better returns.
Would you be willing to pay a slight bit more in expense and / or sales load for a fund that has delivered consistently better returns than its peers?
Generally speaking, this is somewhat ingrained in the baby boomer culture. Further, many of these funds are already so big, that they want to limit who invests in the funds (bigger fund = harder to get larger returns). Therefore, they say “Well, if you want to invest…pay up”
Research and taking the time to see what is a good and bad investment would equal success.
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