Low expense ratio example: Fidelity 500 Index. Expense ratio of 0.015% and a 10 year annualized return of 14.99%. Hypothetical growth of $10K, invested 10 years ago, would be $40K today.
Higher expense ratio example 1: Fidelity Select Technology Portfolio. Expense ratio of 0.75% but 10 year annualized return of 21.10%. Hypothetical growth of $10K, invested 10 years ago, would be $67,850 today. Of course it's less diversified than the S&P 500 index.
Higher expense ratio example 2: Fidelity Large Cap Stock Fund. Expense ratio of 0.67% with 10 year annualized return of 16.75%. Hypothetical growth of $10K invested 10 years ago would be $47K today. More diversified than example 1 above but less diversified than S&P 500.
In a lot of instances, the higher expense ratio pays for itself in terms of additional returns over a S&P 500 index fund. However, most posts I read, an index fund seems to be the first and foremost recommendation based on the lower expense ratio and diversification. But diversification aside, a high expense ratio isn't always bad such as the cases above, am I right? or am I missing something? My question is scoped to a tax deferred or exempt account.
Submitted February 28, 2019 at 03:21AM by millamb4 https://ift.tt/2T68ry3
