How Mutual Fund Trading Costs Hurt Your Bottom Line
When investors are shopping around for mutual funds, they have a wealth of data at their fingertips. They know, for instance, how much a given fund charges in management and operational fees (its expense ratio). They also know how a particular fund has performed over various time periods and what type of investments management held as of the most recent reporting date.
In a new study, published in the Financial Analysts Journal, Roger Edelen, Richard Evans, and Gregory Kadlec—of the University of California, the University of Virginia, and Virginia Tech, respectively—conclude that high trading costs put a significant damper on the returns investors take home.