Wednesday, August 11, 2010

Low Fees Reign Supreme

Morningstar, a leader in researching stocks, mutual funds, and annuities, announced a new study concluding that using low fees as a guide would give investors better results than even Morningstar's own star-rating system, which considers risk-adjusted returns.

Morningstar found that in aggregate, low-cost funds had better returns than high-cost funds across all asset classes during various periods from 2005 through March 2010. For example, domestic stock funds in the cheapest quintile in 2005 posted average annualized returns of 3.35% over the ensuing five years, compared with average returns of 2.02% for funds in the most expensive quintile.

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