Bogleheads® Live Dr. Sunil Wahal on hidden fund costs
Jun 17, 2022
Dr. Sunil Wahal, a finance professor and director at Arizona State University's Center for Investment Engineering, unpacks the hidden costs of mutual funds that often remain overlooked. He discusses the impact of trading costs and how they can erode returns, using relatable examples for clarity. Wahal explains the challenges investors face during mutual fund redemptions and contrasts the performance of active versus passive funds. He emphasizes the importance of financial literacy, particularly regarding share lending and the benefits of lower-cost investment options like ETFs.
AI Snips
Chapters
Books
Transcript
Episode notes
Hidden Mutual Fund Costs
- Mutual funds have hidden costs beyond expense ratios and trading fees.
- These include implicit trading costs, tax externalities, and performance externalities.
Impact of Outflows
- Outflows from mutual funds create costs for remaining investors, including capital gains and lower performance.
- These externalities are a significant but often overlooked aspect of mutual fund investing.
Evaluating Funds and Platforms
- Consider implicit costs when evaluating active vs. passive management and choosing investment platforms.
- Look for platforms with transparency on turnover, trading costs, and fund flows.
