In the article below, Peter hits the nail on the head with his point about cost. Many articles fiercely debate which is better: active management or passive management. Attempting to out-guess other portfolio managers (active management), these articles often promote index funds (a form of passive management) as superior to a higher-cost portfolio manager.
In contrast, I believe total cost has the biggest impact on long-term investment performance (both the cost you see, such as expense ratio, and the cost you don’t see, such as trading cost and bid-ask spreads). Index funds have gained popularity because they are a low-cost option. However, the hidden costs of trading are even more important to monitor, as they are typically three times more expensive than the cost you can see.
With just a recent statement, we can run Portfolio Scope™, our proprietary analysis that will provide insight into your portfolio’s cost and strategy, as well as our opinion on its risk-return characteristics.
Enjoy this well-written article on why you should ask about total cost when choosing an investment: