Wednesday, March 14, 2012

Which Would You Rather Have?

By Tim Husson, PhD and Olivia Wang, PhD

Last month we had a blog post introducing the FINRA Mutual Fund Expense Analyzer tool. In this post we apply it to the 25 largest mutual funds and ETFs measured by net asset value using data from Morningstar. We assumed for this calculation an initial investment of $1,000 held for five years, and plot the total fees and sales charges over that period against the historical 5 year annualized total return of the fund:


There is no clear linear relationship between returns and fees as depicted in the graph; however, it is interesting to point out the cluster of funds with high fees between $80 and $100 and returns around 1-2% return are all from a single issuer, American Funds, as shown in the red circle. And the cluster of funds with low fees but similar returns, shown in the green circle, are all from Vanguard with the only exception of the SPDR S&P 500 ETF (ticker: SPY). The table below shows the list of funds in the green circle (marked as green) and those in the red circle (marked as red) together with their tickers.
                                 
SPY SPDR S&P 500 ETF
VMMXX Vanguard Prime MM;Inv
VTSMX Vanguard T StMk Idx;Inv
VINIX Vanguard Instl Indx;Inst
VFIAX Vanguard 500 Index;Adm
VTSAX Vanguard T StMk Idx;Adm
VWO Vanguard MSCI Em Mkt ETF
AGTHX American Funds Gro;A
CAIBX American Funds CIB;A
AMECX American Funds Inc;A
CWGIX American Funds CWGI;A
AIVSX American Funds ICA;A
AWSHX American Funds Wash;A

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