TITLE

How Much Is That Basis Point Worth?

AUTHOR(S)
McQuarrie, Edward F.
PUB. DATE
August 2009
SOURCE
Journal of Financial Planning;Aug2009, Vol. 22 Issue 8, p58
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Mutual fund expense ratios and loads. along with adviser fees and wrap account charges, are among the many ways in which investors pay for investment management Unfortunately, to assess trade-offs between alternative fee arrangements expressed in fractions of a percentage point requires a facility with exponential series (that is, time value of money calculations) that too many investors lack To bring to the surface the land of misunderstandings to which investors all too often succumb, this article reviews such questions as: o Are low expense ratios generally more important in the case of stock funds or bond funds? o If paying a load earns a reduction in expense ratio, should the load be paid on ones stock funds or bond funds? If one financial planner charges an annual wrap fee, and another a one- time setup charge, what's the best way to compare total costs? The proper procedure is not to focus on the magnitude of the expense ratio in relation to the forecast returns, but to calculate dollar results for the two exponential series. All basis points are not created equal when they figure in exponential series. This is the dark side of what is sometimes referred to as the magic of compound interest. The higher the rate of return, the more costly a single basis point of additional expense becomes. Wrap fees can be far more expensive than they first appear.
ACCESSION #
43800570

 

Related Articles

  • MAJOR Bond Funds.  // Money;Feb2004, Vol. 33 Issue 2, p121 

    Here are the results for 474 bond funds that are listed on the Nasdaq, have assets of at least $400 million, are available to individual investors for a minimum investment of $25,000 or less and have been in operation since Jan. 1, 2003 or earlier. This year Lipper is the data provider. As a...

  • Marsico 21st Century Wraps up a Great Year. Wallace, Karen // Morningstar FundInvestor;Jan2007, Vol. 15 Issue 5, p13 

    The article offers information on the leaders and laggard investment companies in the U.S. American Funds Income Fund of America topped all other moderate-allocation funds with a 20% increase in 2006. Marsico 21st Century accumulated 19% return in 2006 aided by a focus on broad macroeconomic...

  • FUNDS THAT INVEST IN BIG STOCKS SURGE. Poppick, Susie // Money;Mar2011, Vol. 40 Issue 2, p120 

    The article briefly comments on the performance of the publication's "Money 70" list of mutual funds for the month ended January 19, 2011, and presents several charts that provide return data for these funds arranged by several categories including large-capitalization stocks,...

  • Fund Flows Flat for December, $402B for Year.  // Plan Advisor News;2015, p33 

    The article focuses on data from consulting firm Strategic Insight which show that annual net intake into long-term funds in the U.S. was 402 billion U.S. dollars in 2014.

  • Sector Focus: Europe has been the driver for global bond performance.  // Money Marketing (Online Edition);9/5/2013, p53 

    The article comments on the impact of concerns over emerging markets on global bond fund managers. It is said that these concerns have held back the performance of many global bond funds. The bond fund sector has actually underperformed its sterling counterparts over three years to mid-August...

  • A note on portfolio performance attribution: Taking risk into account. Bertrand, Philippe // Journal of Asset Management;Apr2005, Vol. 5 Issue 6, p428 

    This paper shows that performance attribution considered alone can be misleading. Indeed, portfolio managers who know perfectly the distribution of an asset's returns and who perform a relative portfolio optimisation according to that information may be penalised in some of their choices by the...

  • CUTTING edge. Freeman, Peter // Bulletin with Newsweek;7/10/2001, Vol. 119 Issue 6282, p64 

    With returns from managed funds under pressure, the cost of management fees, trailing commissions, performance bonuses and promotional expenses becomes more crucial for investors. This article suggests how one can save on the high cost of investing. The battle by Australia's huge array of...

  • MAJOR Stock Funds.  // Money;Feb2004, Vol. 33 Issue 2, p88 

    Here are the latest results for 1,722 equity funds that are listed on the Nasdaq, have assets of at least $116 million, are available to individual investors for a minimum investment of $25,000 or less and have been in operation since Jan. 1, 2003 or earlier. The data provider is Lipper. As a...

  • Regulation: Watch on wealth managers. Collins, Simon // Fundweb;3/3/2014, p21 

    The article reports that the challenge for a retail adviser-arranger and investment manager is an area of increasing interest for some firms wishing to launch a fund or funds. It is mentioned that the due diligence required and the selection of an authorized corporate director to partner with...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics