Investors Should Focus on Outcomes Not Just Fees

Low-cost investing is extremely important, and recent no-fee fund developments should be celebrated. However, it is not a risk-free proposition

Emma Morgan 22 August, 2018 | 8:23AM

Assets in passive funds continue to rise at astounding rates with no signs of abating. This trend has received another boost, with Fidelity the first product provider to offer free “core” offerings to U.S. investors, with two investments that provide broad access to the local and international equity markets.

This has aroused widespread feedback, with everything from cynicism to applause. We have a rather pragmatic view of the matter and hope to shed light by relating it to the future plight of a multi-asset investor. Along the way, we’ll continually circle back to what is most important: asking whether the developments help investors to reach their financial goals.

Dilemma 1: Remembering the Goal

One should not underestimate the psychological shift the recent developments may have. With no fees and no minimum investments, this development could usher in a new era of investing. In this sense, it is difficult to see such developments as anything but positive, although we would temper the blind enthusiasm by encouraging investors to think about what they are trying to achieve.

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About Author

Emma Morgan  is a Portfolio Manager for Morningstar Investment Management EMEA

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