Tag Archives: costs

The Hidden Costs of Index Funds

While it is widely understood that index funds represent a low-cost way for investors to achieve broad diversification, a recently published research study sheds light on a “hidden cost” associated with investing in index funds.

Antti Petajisto, a professor at NYU’s Stern School of Business, conducted the original research for “The Index Premium and its Hidden Cost for Index Funds,” as part of his Ph.D. thesis at Yale in 2003.

The study examines the ways that stock prices change between the time that it is announced that a company will be added or removed from a stock index (such as the S&P500) and when the company’s stock is actually added.  The research suggests that canny institutional investors can make a profit in this period that results in a drag on performance for index fund investors.

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The Top 5 Things Every Investor Should Know

Worried about the wild swings in the stock market? Not sure what’s next for the economy?

You can successfully invest in these uncertain times—and you won’t have to chase the next new IPO or buy into the latest advice on CNBC.

Here are the top five things every investor should know. Continue reading

How Much Does Your 401(k) Plan Really Cost You?

Ron Lieber at the New York Times recently came out with an article that explores one of the most important problems with 401(k) plans: they can be expensive and plan participants have no idea how much their plans are costing them.

There are costs associated with with running a 401(k) plan–administrative costs for the plan, for example, are distinct and in addition to the expenses associated with the individual funds within the plan.  These costs are sometimes added to the fund’s expense ratio in the creation of a share class specifically designed for retirement plans.  These are usually “R”  class shares.

The New York Timesarticle cites research by BrightScope, a firm that compiles data on 401(k) plan costs, that shows … Continue reading