The cost of U.S. mutual funds and ETFs shrank last year by the second largest amount on record, saving investors $5.5 billion, according to a new study from Morningstar.
The big picture: The price of investing has been falling precipitously since the creation of index funds, punctuated recently by negative-fee products that actually pay a small rebate for investing.
What they're saying: "As awareness grows around the importance of minimizing investment costs, we have seen a mass migration to low-cost funds and share classes," said Ben Johnson, Morningstar's director of ETF and passive strategies research.
Morningstar's study found that in 2018:
- Investors are paying approximately half as much to own funds as they were in 2000, roughly 40% less than they did a decade ago and about 26% less than they did 5 years ago.
- Fees have fallen significantly for both active funds and passive funds.
What to watch: Fees have fallen across the board, but investors are choosing the very cheapest options. The least expensive 20% of funds saw net inflows of $605 billion, with the remaining 80% of funds experiencing net outflows of $478 billion.
- Of the $605 billion that flowed into the cheapest 20% of funds and share classes, 97% of net new money flowed into the least costly 10% of all funds.