The chart below highlighted by Michael Batnick further demonstrates that investors are voting with their wallets as they realize they have been paying high fees for chronically under-performing funds. In the first half of 2016 well over 80% of actively managed funds – experts researching and hand picking the stocks in their funds – saw investment returns that lagged the market in general.
And this is particularly important as market returns are forecast to be low – in the 3% range for the near future. Much of these funds are moving to passive index based funds that cost a fraction of the fees charged by actively managed funds.
So if you are paying a fund 1% that could eat up a third of your return, or more if the fund did not beat the market / benchmark. What’s worse is many fund managers are “closet indexers” who get most of their return from the overall market, not from their specific stock picks.
So pay close attention to the fees you pay, both for investments and for financial advice. It’s a buyer’s market in that regard and what you don’t pay you keep.