Fund sponsors seek the highest returns for the investor, yet also desire to turn the highest possible profit for themselves, a Reuters columnist attests. The expense ratio of the average mutual fund recently stood at 1.36%, nearly 50% higher than in the late 1970s, Reuters quotes John Bogle, Vanguard founder, as saying.
But Vanguards annual expense ratio is only 26 basis points, primarily due to the fact that Vanguard is owned by shareholders, whose main goal is to maximize their own returns.
Bogle calls for all funds to have a breakdown of the costs of fund ownership, with a clearly stated annual dollar cost. But this isnt likely to happen unless funds appoint independent chairman to their boards, Bogle says, rather than allowing the head of the investment management company to serve on that spot.
Although the fund industry has avoided the scandals of corporate America, it owes it to investors not to overcharge investors, the columnist says.