Looking deeper into the mechanics of index investing, however, reveals subtle but real costs that can far outweigh the advertised management fees. In some cases, these costs can be 2% or more per year and should thus be considered when deciding on or formulating investment strategies.
Index Investing: Low Fees but High Costs
Many investors and investment professionals are aware of the cost/performance issues within the actively managed mutual fund industry. This has provided a significant boost to index investing and exchange traded funds (ETFs). Virtually everyone knows about the low fees and index-like performance; it is a very compelling story relative to higher-cost mutual funds that underperform their related indices on average.