Monday, June 12, 2006

2005 Mutual Fund Expenses

The ICI reports that overall average mutual fund fees decreased in 2005 to 1.13% (.91% net of sales loads) for Equity, .90% (.7% net of sales loads) on Bonds and .41% on Money Market Funds.

Retirement Plan providers frequently mislead retirement plan sponsors and their participants by comparing their fund expenses to Morningstar total fund expense ratios. The Morningstar total fee ratio's include the fee impact of sales loads which are not at all relevant to institutional investors such as retirement plans. This practice grossly distorts the comparison in favor of the providers yet it is common practice. At a minimum, Plan fiduciaries should insist their providers compare Plan fund expenses to Morningstar No Load averages.


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