Investors have been paying less to invest in mutual funds, according to recent data from the Investment Company Institute. But behind those numbers are a trend that you should consider for your investing.
In this following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the lower expenses that mutual-fund investors have been paying. Dan notes that the overall average fee is falling because more investors are gravitating to low-cost index funds. Dan points out that index funds almost always have much lower expenses than actively managed funds, and they can also be effective in helping you invest in popular indexes like the Dow Jones Industrials (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC). But Dan warns that with smaller markets, indexing can distort markets by focusing on a small number of stocks and leaving out others. Dan concludes that indexing is right for many people, but you have to know what your fund owns.
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Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.