I recently found out my sister puts a lot of her money in mutual funds and calls it a day. Generally this is a horrible choice considering most mutual funds under-perform the market as a whole. What’s worse is a lot of her funds basically track the market so they’ll never outperform the market due to expense fees.
My advice to her was to at least buy some ETFs with extremely low expense ratios such as many of the ones offered by Vanguard. Vanguard’s Total Stock Market ETF sports an unbelievably low expense ratio of 0.07%.
If you’re investing over the long run, the compounding effect of lost dollars to expense fees does add up. Every dollar lost is another dollar that doesn’t work to earn you more money.
Vanguard does have a slew of industry specific ETFs if you want to invest in a particular industry. The expense ratios are slightly higher but are still among the lowest in the industry. Their Energy ETF sports a respectible expense ratio of 0.25%.
