The real costs of mutual funds - March 1, 2010
One of the advantages of investing in our individual trust deeds or our mortgage pools is cost clarity: we don’t have hidden fees or expenses, and our stated yields are exactly what our investors are projected to receive. We believe this is a breath of fresh air when compared with mutual funds with expense ratios sometimes reaching 1.5% or more.
But, it turns out that these stated expenses — which are aggravating enough — are only part of the cost mutual fund investors must bear. Less obvious expenses like trading costs are unpredictable — and can take a big bite out of investor returns, as explained by an excellent article in today’s Wall Street Journal.