David Winters, a veteran value investor, has a provocative idea: Index funds aren’t the dirt-cheap choice we all believe them to be.
These autopilot portfolios that seek to match the market, not to beat it, have become the most popular investment vehicle in history. Tens of millions of investors hold roughly $4 trillion in U.S. stock index funds — which report annual ownership costs as low as 0.03%, or $3 on a $10,000 investment.
Those expenses are drastically understated, says Mr. Winters, portfolio manager of Wintergreen Fund. In his latest letter to shareholders in the $303 million fund, Mr. Winters argues that the typical S&P 500 index fund incurred ownership costs exceeding 4.3%, or more than $430 per $10,000, in 2016.
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This article was originally published on The Wall Street Journal.
Further reading
Jason Zweig, Your Money and Your Brain
Jason Zweig, The Devil’s Financial Dictionary
Benjamin Graham, The Intelligent Investor
Lucian A. Bebchuk, Alma Cohen, and Scott Hirst, The Agency Problems of Institutional Investors
Miriam Schwartz-Ziv and Russ Wermers, Do Institutional Investors Monitor Their Large vs. Small Votes Differently?