DOING THE MATH

Publication
Article
Physician's Money DigestMay 15 2003
Volume 10
Issue 9

If your stock mutual fund isreturning 20% a year, why shouldyou care if it has a 1.5% expenseratio? Because when stocks are staggeringto year-end losses or postingmodest gains, a heavy expense ratiocan put a big hole in your profits oradd to your losses. Over time, highexpense ratios can take a huge toll. Anest egg in a fund that returns anaverage 10% a year and charges1.5% for expenses will eat up abouta third of your profits over 30 years.In contrast, a fund with a 0.2%expense ratio will use up just 5.3% ofyour 30-year profits paying offexpenses. According to a study byJohn Bogle, founder of VanguardGroup, low-cost stock funds beattheir high-cost cousins by an averageof 2.2% a year over a 10-year period.

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