Cut Management Fees to Increase Return
Mutual funds are a great way to invest your money in the stock market, but all mutual funds charge a management fee. Actively managed funds carry a fee, on average, of approximately 1.5%. That means you pay 1.5% of your total account balance per year for the fund to manage your investments. While that may not sound like much, an equity index fund may charge .2% to .3% as a management fee. (Since the fund is based on an index, management duties are relatively few.)
The net result: You keep about 1% more per year of your hard-earned money. Over twenty years, your fund may be worth 15 to 20% more. Whenever you invest in a mutual fund, make sure you understand the fees you will be charged, and what you will receive for those fees.