It is true that the best things in life are not free, but a study shows that when it comes to investing in mutual funds, buying funds with higher expenses is disadvantageous, the Associated Press reports.
The Standard & Poors study evaluated nine investment styles, and in eight of them, funds with higher expenses performed worse than those with lower expenses. Funds with higher fees were victorious only in mid-cap blend funds. In a similar study last year, the results were the same. The researchers at S&P said the reason for mid-cap blend success was the success of small-cap stocks, which dominate portfolios investing in the mid-cap blend style.
Eric Tyson, who wrote "Investment for Dummies," said investing in funds with higher expenses is okay when buying into a new fund that does not yet possess heavy assets. But for the most part, Tyson told the AP that low fees and solid performance should be the biggest key for investors.
"You can have your cake and eat it too," he said.