Buy an Index, Increase Your Return

As detailed in my Mutual Fund Fees 101 post, the expenses you pay to hold mutual funds are a hidden cost that can be substantial. Every dollar you pay towards expenses erodes your return. The impact is even more substantial when you compound it over the average investor's lifetime.

A recent study found that, collectively, investors spend about $100 Billion Per Year trying to beat the market. If you're invested in an actively managed mutual fund (i.e. those A, B, C, "loaded" with extra cost mentioned in my prior post), some of your own dollars are in that whopping $100 Billion figure.

Click on the following link to read the entire New York Times article. Note that the referenced academic research showed that a typical investor can increase annual return by just shifting to an index fund and eliminating the expenses trying to beat the market.

The researchers also concluded that the best course is to buy and hold index funds for the long term because the odds are against you if you try to beat the market.

http://www.nytimes.com/2008/03/09/business/09stra.html?_r=1&scp=1&sq=can%20you%20beat%20the%20market&st=cse&oref=slogin