Most mutual fund shareholders don’t know what they are being charged for their mutual funds and more importantly, why these expenses are critically important.
In normal economic times, when the the economy is healthy, fund fees erode your investment returns, but they are offset by the investment gains. The fees are still significant, and in many cases too expensive compared to what the shareholder gets in return, but the emotional high of seeing positive gains masks the sting of high fees.
But that only applied when your portfolio was positing gains.
Things are different now. It will take about generation to recover the losses most people have seen in their house prices, portfolios, and the latest threats, stagnant wage growth, combined with the possibility of more layoffs.
Three Important Factors to Consider
Here are the factors which make its important to focus on mutual fund expenses, especially those charged by load mutual funds:
1.–The Drop in Housing Prices.
2.–The Drop in Investment Returns.
3. — Stagnant Wage Growth.
The Washington Post reports that wages are stagnating. This means that in addition to the decline in housing prices and financial portfolios, wage growth will not be able to sustain a family’s standard of living.
According to the Post’s article, “to boost their savings, they typically need faster income growth or lower spending, and, as Harvard University economist Lawrence Katz put it, “It is going to be a long time before we see sustained pay raises.”
