There is another reason howevr. Even the lowest cost index mutual funds have more overhead then you are going to have if you use a discount broker and buy and hold (and they hide these costs
Who is the "they" - mutual funds or discount brokers? And how are they being hidden? >>>I've been told by a Law Professor who works on security regulation that the >management fees reported by index funds do not fully reflect the costs they incur for >reballencing their portfolio's to match market shares and that the actual costs are a >multiple of the reported management fees. It was claimed that if one compared the >return on the S&P500 to the return on holding the mutual fund the difference in basis >points would be larger than the reported management fees. I told this to a stock >broker who insisted that that was wrong or that I had misunderstood and that perhaps >what the law professor meant was that because the fund incurs capital gains in the >process of dealing with fluctuations in invested funds and these have to be paid out >and taxed that that would account for the difference between the afrter tax return >from holding the market yourself and holding the mutual fund. Take your pick. I don't >have first hand knowledge to judge. Discount brokers can really beat a .2% annual fee with no loads on either end? >>>For sure. Most brokerage houses don't have any fees other than fees for trading. >Even if you have a round-trip cost of $100 for $10,000 worth of stock (you can do >much better than this - - $14 is not out of the question) if you hold it for 20 years >you are way ahead of a .2% annual fee. But again, according to my sources the actual >difference in performance between holding yourself and holding in the lowest cost >mutual fund is a lot more than .2% per year. - - Bill Dickens
