Fund Fees: A Key to Predicting Investment Success

Who else loves a benchmark that helps make investment decisions easier?

We will make you ornaments of gold with studs of silver.
—Song of Solomon

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John Rekenthaler, Morningstar research director, discusses a recent report showing a direct correlation between a mutual fund's management fees and its long-term performance.




Sure, there always are going to be exceptions to the rule. Yet if you are someone overwhelmed by mutual funds available to choose from, the matter of management fees can give you easy ability to separate the gold from the dross.

Mr. Rekenthaler's comments on assessing fund fees across asset classes (i.e. a stock fund versus a California municipal bond fund) could prove most valuable in deciding how to allocate one's retirement capital (i.e. in 401(k), IRA, etc.). Often times one's choices here are limited. Assessing fees among those funds one is given to choose from, then, might prove a worthwhile exercise.

—Tom Chechatka