When done right, index tracking is a wonderful way of passively achieving broad diversification at a very low cost. For example, the Vanguard 500 fund (FUND: VFINX) , which tracks the S&P 500 index (INDEX: ^GSPC) and has more than $110 billion in assets, charges just 0.17% in expenses.
But index tracking done wrong is a painful thing. Using that very same benchmark, the Munder Index 500 A (MUXAX) charges more than three times as much -- 0.76% -- and, worse, it carries a 2.5% sales load! All to track the exact same index in exactly the same proportions.
In the following video, Brian details the costs to investors over the long run and explains how investors can fight back against these awful, high-fee index investments. (Run time is 4:28.)
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At the time thisarticle was published Fool.com managing editorBrian Richardsowns shares of the Vanguard 500 index fund. The Motley Fool has sold shares of SPDR S&P 500 short. The Motley Fool has adisclosure policy.
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