High Fund Costs Can Devour Your Returns


A reader asks this question: "I stumbled across some information on Vanguard's Web site about what they call the 'Investing Truths.' One of them is about costs and shows that a 1.2% expense ratio would eat up 46% of an 8% return over 50 years. Can that be true?"

The short answer is "yes". Based on a hypothetical investment of $10,000, a fund with an expense ratio of 1.2% would yield $248,322 to the investor and a whopping $210,693 to the fund.