Jack Bogle spelled it out to me quite simply: “Let’s assume the stock market gives a 7% return over 50 years,” he began. At that rate, because of the power of compounding, “each dollar goes up to 30 dollars.” But the average fund charges you about 2% per year in costs, which drops your average annual return to 5%. At that rate, “you get 10 dollars. So 10 dollars versus 30 dollars. You put up 100% of the capital, you took 100% of the risk, and you got 33% of the return!”
