Posted: 31 Mar 2013
Date Written: March 29, 2013
Recent regulatory changes have brought a renewed focus on the impact of investment expenses on investors’ financial well-being. The author offers methods for calculating relative terminal wealth levels for those investing in funds with different expense ratios. Under plausible conditions, a person saving for retirement who chooses low-cost investments could have a standard of living throughout retirement more than 20% higher than that of a comparable investor in high-cost investments.
Keywords: Alternative Investments, Investment Companies, Fund Management Fees, Performance Measurement and Evaluation, Risk-Adjusted Measures, Effect of Expenses, Portfolio Management, Performance Measurement, Attribution, and Appraisal, Mutual Funds, Pooled Funds, Exchange-Traded Funds (ETFs)
Suggested Citation: Suggested Citation
Sharpe, William F., The Arithmetic of Investment Expenses (March 29, 2013). Financial Analysts Journal, Vol. 69, No. 2, 2013. Available at SSRN: https://ssrn.com/abstract=2241716