![]() ![]() Cost of portfolio turnover : Portfolio turnover is defined as the percentage of a portfolio that has been replaced in a given year.As you might have guessed, index funds tend to have a much lower expense ratio as they do not require active management. ![]() So if a fund delivers a return of 10% with a 1% expense ratio, your actual return will be 9%. These fees are deducted from the total assets of the fund. Expense ratio : It measures the fees paid for the fund’s management fees and operating expenses.If you invest in index funds, the costs are around 1% annually. Some managed funds might have additional sales charges. These costs include expense ratio, cost of portfolio turnover and tax on realised gains. If you invest in actively managed funds, you will pay approximately 3% - 3.5% annually. So what are the costs associated with investing in actively managed funds and index funds? ![]()
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