Delivering value with a low-cost approach to 401(k) plan investments.
- Lower fund operating expenses.
- Can expand choices and lower fees for participants with index mutual funds and exchange-traded funds.
- Help lower or eliminate investment minimums.
- May free up resources and allow plan to offer personalized advice and managed account services.
- Putting fewer dollars toward fees may mean having more available to invest.
- May make higher returns possible, as index funds often outperform actively managed funds.1
- Thanks to compounding, the more participants invest early and over time, the more potential for their 401(k) to grow.
Expense and low cost
Expense ratios have steadily fallen for mutual funds and ETFs over the past few decades.
The asset-weighted average expense ratio across all funds was 0.57% in 2016, down from 0.61% in 2015 and 0.65% in 2014.2
Low-cost index funds can outperform actively managed funds.
84.23% of large-cap fund managers underperformed the S&P 500® Index over the past five years, and 80.56% have underperformed the benchmark since 2014.1