Jack Bogle, the founder of Vanguard and of the index fund, once said that his big idea is not the Efficient Markets Hypothesis, but the Cost Matters Hypothesis. And boy is he right. The following chart shows the difference in total return between an index fund and an actively-managed fund charging the average amount, assuming their gross returns are the same, which they are in the aggregate.


This is some brutal math. It’s 27 percent of your retirement going to Wall Street for nothing. Actually, less than nothing. Remember, about 80 percent of actively managed funds do worse than index funds after you take fees into account. It’s a Wall Street handout that you can’t afford to make.

Skip the fees, and save your retirement.

Keep your costs low. Unless you are getting stunning performance, it is likely to be your best move.

The Crushingly Expensive Mistake Killing Your Retirement by Matthew O’Brien

(h/t Eddy Elfenbein)