Were fans ofeasy, set and forget investing.
And that means investing in funds with low fees that dont eat into your returns.
And a recent study from Morningstar found that funds with low fees are generally more successful.
Weve told you all aboutindex funds and how they make investing easy and less scary.Another reason to love them?
But Morningstars new study found that cheap funds actually perform better than more expensive, actively managed funds.
It was enough for them to declare that fund fees are a strong and dependable predictor of future success.
To gauge a funds success, they looked at historical data and how much the fund earned over time.
Similar funds with a 2.2% expense ratio only yielded 8.8 percent.
Of course, you could make the correlation-causation argument here.
Just because a fund is cheaper doesnt necessarily meanthatswhy its performing better.
However, theres an important relationship between performance and cost.
AndForbes contributor John Wasik breaks it down:
Why are cheaper funds more likely to succeed?
Managers arent running up costs trying to (unsuccessfully) time the market in many cases.
Their fees arent devouring total returns.
Thats why I invest in them in my portfolios, including an array of Vanguard funds.
Its just another reason to go with low-cost fees in your portfolio, rather than actively managed ones.
Over time, they earn a solid, steady return.
Study by Morningstars Russel Kinnel Shows Fund Fees are Proven Predictors of Future Success| Morningstar
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