The following table provides the “Net Expense Ratio” and the “Turnover Ratio” for all the broad Morningstar Mutual Fund Categories. As you can see, both these ratios are considerably higher than the comparable numbers for Exchange Traded Funds. For example, the weighted average Expense Ratio for our Global Equity ETF Model is 0.31% vs. 1.46% average for World Stock Mutual Funds. This saving goes directly to augment the investor’s bottom line. You can use this table to compare the costs of your current portfolio to an average Mutual Fund and get an idea of where you stand on the cost curve.
MUTUAL FUND AVERAGE EXPENSE & TURNOVER RATIOS SOURCE: MORNINGTAR (May 2013)
Name |
Morningstar Category |
Prospectus Net
|
Turnover Ratio % |
|---|---|---|---|
| DOMESTIC EQUITY | |||
| US OE Large Blend | Large Blend | 1.18 | 70.60 |
| US OE Mid-Cap Blend | Mid-Cap Blend | 1.30 | 69.11 |
| INTERNATIONAL DEVELOPED EQUITY | |||
| US OE Foreign Large Blend | Foreign Large Blend | 1.41 | 69.77 |
| US OE Foreign Small/Mid Blend | Foreign Small/Mid Blend | 1.43 | 43.69 |
| US OE Europe Stock | Europe Stock | 1.69 | 134.00 |
| US OE Pacific/Asia ex-Japan Stk | Pacific/Asia ex-Japan Stk | 1.80 | 82.16 |
| EMERGING MARKES EQUITY | |||
| US OE Diversified Emerging Mkts | Diversified Emerging Mkts | 1.64 | 77.13 |
| WORLD EQUIDITY | |||
| US OE World Stock | World Stock | 1.46 | 62.26 |
| DOMESTIC FIXED INCOME | |||
| US OE Short-Term Bond | Short-Term Bond | 0.84 | 133.64 |
| US OE Intermediate-Term Bond | Intermediate-Term Bond | 0.92 | 229.34 |
| US OE Long-Term Bond | Long-Term Bond | 1.00 | 105.54 |
| US OE High Yield Bond | High Yield Bond | 1.16 | 78.09 |
| US OE Inflation-Protected Bond | Inflation-Protected Bond | 0.82 | 95.31 |
| US OE Muni National Interm | Muni National Interm | 0.84 | 36.67 |
| US OE High yield Muni | High yield Muni | 1.02 | 26.75 |
| US OE Multisector Bond | Multisector Bond | 1.21 | 99.26 |
| WORLD FIXED INCOME | |||
| US OE World Bond | World Bond | 1.12 | 137.95 |
| EMERGING MARKETS FIXED INCOME | |||
| US OE Emerging Markets Bond | Emerging Markets Bond | 1.27 | 84.04 |
| GLOBAL BALANCED | |||
| US OE World Allocation | World Allocation | 1.45 | 118.09 |
| TRADITIONAL ALTERNATIVES | |||
| US OE Commodities Broad Basket | Commodities Broad Basket | 1.35 | 190.12 |
| US OE Natural Res | Natural Res | 1.54 | 73.72 |
| US OE Convertibles | Convertibles | 1.25 | 72.28 |
| US OS Real Estate | Real Estate | 1.37 | 73.09 |
| US OE Global Real Estate | Global Real Estate | 1.50 | 78.96 |
| ALTERNATIVE INVESTMENTS | |||
| US OE Long/Short Equity | Long/Short Equity | 1.94 | 479.43 |
| US OE Managed Futures | Managed Futures | 2.31 | 311.57 |
| US OE Market Neutral | Market Neutral | 1.79 | 442.87 |
| US OE Multialternative | Multialternative | 2.07 | 221.74 |
| US OE Multicurrency | Multicurrency | 1.37 | 123.56 |
| Volatility | |||
| US OE Single Currency | Single Currency | ||
| ASSET-ALLOCATED FUNDS | |||
| US OE Retirement Income | Retirement Income | 0.98 | 38.44 |
| US OE Conservative Allocation | Conservative Allocation | 1.34 | 77.76 |
| US OE Moderate Allocation | Moderate Allocation | 1.34 | 74.42 |
| US OE Aggressive Allocation | Aggressive Allocation | 1.51 | 56.23 |
| TARGET DATE FUNDS | |||
| US OE Target Date 2000-2010 | Target Date 2000-2010 | 0.96 | 42.68 |
| US OE Target Date 2011-2015 | Target Date 2011-2015 | 1.01 | 49.79 |
| US OE Target Date 2016-2020 | Target Date 2016-2020 | 1.06 | 35.59 |
| US OE Target Date 2021-2025 | Target Date 2021-2025 | 1.02 | 34.45 |
| US OE Target Date 2026-2030 | Target Date 2026-2030 | 1.10 | 34.30 |
| US OE Target Date 2031-2035 | Target Date 2031-2035 | 1.06 | 33.13 |
| US OE Target Date 2036-2040 | Target Date 2036-2040 | 1.12 | 32.06 |
| US OE Target Date 2041-2045 | Target Date 2041-2045 | 1.07 | 32.68 |
| US OE Target Date 2046-2050 | Target Date 2046-2050 | 1.13 | 38.67 |
| US OE Target Date 2051+ | Target Date 2051+ | 1.05 | 34.54 |
Compared to ETFs, a mutual fund is generally less tax inefficient, offers less transparency (with respect to holdings), has a higher cost, and is less liquid (can only be purchased/sold at the close of the trading day). ETFs are typically more transparent with respect to their current holdings and can be purchased/sold throughout the trading day.
