“The Real Cost of Owning a Mutual Fund,” which revealed just how expensive funds can truly be. As the writer pointed out, you’re not only on the hook for the expense ratio, which the magazine estimated conservatively at just less than 1% (0.9%) a year. You’re also liable to pay through the nose for “transaction costs” (all those commissions your fund pays whenever it buys or sells stocks), which Forbes estimated at 1.44% a year. Then there’s the “cash drag,” which it estimated at 0.83% a year. And then there’s the “tax cost,” estimated at 1% a year if the fund is in a taxable account.
