Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Costs Matter Summary Chart

edited March 2019 in Fund Discussions
Hi Guys,

The negative correlation between mutual fund end performance and costs is well documented. This single graph tells the whole story nicely:

Costs just don’t matter. They matter greatly. Control the mutual fund costs and enhance your payday. The size of each data point is a measure of the money being managed. Dodge and Cox is a winner by the graph measurement scales.

Best Wishes


  • edited March 2019
    @MJG- Thanks, that's a pretty interesting chart. I'm commenting so as to kick it over to "Discussions+".


    PS: How did you manage to find a subject that didn't involve Monte Carlo simulations?
  • Hi Joe,

    Thanks. It was a challenge and I was somewhat off my game. I’ll be careful not to let it happen too often.

    Very Best Wishes
  • My word! You do have a sense of humor after all! All these years and I had no idea.
  • Hi OJ,

    Please keep your discovery a secret. I don’t want my enemies to find this out. Wait a minute! I don’t want my friends to find this out either!!!!!

    Note my familiar hello greeting. What’s happening to me? It can’t be good, or can it? Far to many questions!

    Best Wishes

  • Dodge &Cox, best value for your money. Interesting chart.
  • msf
    edited March 2019
    Nice eye candy. A fun chart to look at. Seriously.

    Of course it has to be true that all else being equal cheaper is better. But all else is virtually never equal, and there's a lot being glossed over in this one chart.

    * It's comparing apples and oranges - asset weighted performance vs. unweighted share classes:

    A fund could have five expensive share classes with few assets and one cheap share class; the performance could look good on an asset weighted basis because of the cheap share class but the fund family would look expensive because of all those "empty" expensive share classes.

    Note also that while a load share class might be considered expensive on an absolute basis it could still be rated average or below average in cost. That's because M* groups share classes by type: load, institutional, no load, before ranking their costs as relatively high, average, or low.

    For example, LCEVX, a LCV fund with an ER of 1.56% is said to be "below average" in expenses. Its sibling classes include LCEAX, ER 0.81%, called "low", and LCEIX, ER 0.76% called merely "below average" because NL shares are expected to have lower costs than their loaded brethren. (I'm not faulting M* here for how it evaluates costs; just pointing out what's going on beneath this chart.)

    * Load families tend to make costs look less relevant. As noted above, A shares can be counted as "cheap" even as their costs drag down their performance.

    * At least according to papers I've read, the correlation between costs and performance is stronger for bond funds than for equity funds. That could skew the per-family data, since some families specialize in bonds, while others have more assets in equities.

    * How meaningful is data about share classes for families with very few (say, five) share classes total? As opposed to one with hundreds of share classes.

    There's the usual caveat of relying on stale data. Here's the source of the chart, from four years ago.

    Quoting from that page:
    Dodge & Cox has a perfect 100% score in both metrics, which is a testament to its ...small fund lineup. Vanguard, the largest fund firm, has 100% of its funds with below-average fees. Considering its large lineup of funds, it has an impressive 75% that have a Morningstar Rating of 4 stars or better.
    If you to play with more extensive data, there's the Morningstar Fund Family 150 (Jan 1, 2019): "a semiannual publication that gives investors access to the same analytical rigor our own analysts use to keep tabs on the 150 largest fund families in the United States."

    Full paper:
    Spreadsheet data:
Sign In or Register to comment.