Next Decade: Become the Biggest Loser

We are starting a new decade and for many the last ten years of investment returns have been bleak. It’s now time to squeeze as much performance out of portfolios as possible. To do this most portfolios need to lose — not money but weight in the form of fees and expenses. Here’s how to succeed in transforming your portfolio into the Biggest Loser…

Ladies and gentlemen, I introduce you to the trillion dollar cousin of mutual funds, the exchange traded fund —  often called ETFs. ETFs are generally less expensive than traditional mutual funds. Here’s a quick chart from iShares comparing the average mutual fund expense ratio to the average ETF expense ratio as of the middle of 2010. The numbers are in basis points.

As you can see, if you are a traditional mutual fund investor you have the potential to significantly reduce the fees, or expense ratios, you are paying for your investments while still owning products that allow you to participate in attractive investment opportunities.

So as you prepare your portfolio for the next decade lighten up on your expenses, as sometimes it really pays to be a loser.