May 2, 2019

Investors saved over $5 billion on fund fees in 2018

Dion Rabouin, author of Markets

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.

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Data: Morningstar; Chart: Harry Stevens/Axios

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.

Go deeper: Wall Street fund fees are dropping at an astonishing rate

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