Dallas County Living Well Magazine Summer 2015 | Page 47

Many researchers have compared a fund’s advertised performance to its investors’ returns. In most funds, investor
returns tend to lag behind fund performance, which means
that investors are making poor timing decisions. One research paper linked a large performance gap to higher
structural cost. The results were astonishing!

year. Since index funds are managed using a low turnover,
they often realize and distribute capital gains less frequently than actively managed funds, especially short-term gains
that are taxed at a higher rate.

Total Cost: Structural, behavioral, and tax costs are often
interrelated. If an investor pays high fees, he or she is usuInvestors who pay high fees for investment products are, ally also turning over the portfolio m