Orly? So you're OK with paying an extra 1% above the market rate on your mortgage? Because that's the kind of thing you're talking about. 1% a year will eat quite a lot out of your retirement over 40 years. I.e. 40%.
the fee is not on the return its on the balance. so if you make money, they make money. if you lose money they still make money. mutual fund feeds end up being massive over a long period of time which is why financial advisors do so well if they have a big enough asset base
The public market funds outperformed their passively managed benchmarks, even considering the management feeds paid. To continue your mortgage comparison, New York is paying a real estate professional a certain percentage of money to find them a better deal on their mortgage, and NY still gets a better rate going through them after their fees are paid.
Except with a mortgage you're not running a risk that next year you will suddenly have an extra 50k added to your mortgage.
Actively managed money has a very nice angle going. They can charge money to actively manage your funds, while still getting to keep a share of any profits generated.
Insurance companies have to pay money to get access to the same funds, to do the same gambling.
It is somewhat insane that you can run a business where the choices are:
a) Do admin work to balance an indexed portfolio for price A
b) Gamble with money for price (B + X% of profits)
And somehow people feel its ok that the price of B is higher than the price of A.
