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Look for low expense ratios from "summary" of A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Twelfth Edition) by Burton G. Malkiel
When selecting investments, it is crucial to consider the expense ratio associated with each option. This ratio reflects the percentage of a fund's assets that are used to cover operating and management costs. In other words, it represents the amount of money that investors will lose to fees each year. While this may seem insignificant at first glance, even a small difference in expense ratios can have a significant impact on an investor's returns over time. Investors should look for low expense ratios when choosing funds. By doing so, they can minimize the amount of money that is taken out of their investment returns. For example, if two funds have similar performance but one has a higher expense ratio, the fund with the lower expense ratio will likely provide higher net returns to investors. This is because less of the fund's assets are being used to cover fees, allowing more of the returns to flow back to investors. High expense ratios can erode returns over time. Even seemingly small differences in expense ratios can compound over the years, leading to significant reductions in overall returns. For example, a 1% difference in expense ratios may not seem like much initially, but over a long investment horizon, this can add up to substantial losses. Therefore, investors should be mindful of expense ratios and choose funds with lower fees whenever possible. In summary, keeping an eye on expense ratios is crucial for investors looking to maximize their returns. By selecting funds with low expense ratios, investors can ensure that more of their money is working for them rather than being siphoned off to cover fees. Over time, this can lead to significantly higher net returns and a more successful investment strategy.
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