It's time again to share an email message with you.

After writing about some grief that Wal-Mart was receiving for offering investment options with relatively steep fees in its employee 401(k) plans, I heard from a 401(k) advisor. He took issue with my piece and made some good points. He said:

When comparing the expenses of actively managed funds to index funds it was very convenient that you compared the average for actively managed funds (with a comment on the high end) to the select low end for index funds.

I don't think I was wrong to offer the data points I did. Investors should know what annual fees are for managed mutual funds (around 1% to sometimes 2%), and to know how low those fees are for some index funds (less than 0.10%).

But it's also useful to give a more thorough context for that information. For example, according to data from Morningstar, the median expense ratio for an S&P 500 index fund was 0.63% in 2006. Curiously, that is up over time, from 0.35% in 1992 and 0.55% in 2000.

Consider some examples
Let's look at some representative ratios from Morningstar for S&P 500 index funds, which tend to fall on the lower-than-average side compared to other index funds. The JPMorgan International Equity Index (OEIAX) fund, for example, bears a ratio of 1.07%, plus a whopping front-end load of up to 5.25%.

The Vanguard S&P 500 Index (VFINX) fund has an expense ratio of 0.15%, and the ratio for Morgan Stanley S&P 500 Index A (SPIAX) fund is 0.58% -- plus up to 5.25% in front-end load fees.

The Schwab S&P 500 Index (SWPIX) fund charges 0.35%, meanwhile. If you have a minimum investment of $10,000, you can pay just 0.10% for the Fidelity Spartan 500 Index Investor (FSMKX), or as little as 0.07%, if you have $100,000 or more to invest, in the Fidelity Spartan 500 Index Advantage (FSMAX) fund. The S&P 500 exchange-traded fund SPDR (AMEX: SPY) comes in at 0.08%, and you can buy as little as one share, recently going for around $135.

Meanwhile, remember too that expense ratios, while important to consider, aren't all you should consider -- especially when you're looking at apples and oranges. For example, when comparing two investments and their expense ratios, note that if one has a ratio of 1.20% and the other 0.70%, the "more expensive" one might still have a stronger track record and greater promise.

If you expect to earn, say, 10% annually, on average with the 1.20% fund and 9.0% with the 0.70% one, then the former fund would appear to be the better buy, all other things being equal.

Some higher fees are worth it
Now that you have an idea of the fees you'd face with an S&P 500 index fund (an investment we've long recommended for many, if not most, investors), let's look at some alternatives. Remember that over the past decade, the S&P 500 has averaged an annual return of 4.1%, well below the long-term average of around 10%.

Here are a few managed mutual funds (ones run by managers who decide what and when to buy and sell, as opposed to just mimicking an index), their expense ratios, their 10-year averages, and a few of their recent top holdings:




top holdings

Dodge & Cox Stock (DODGX)



Comcast (Nasdaq: CMCSA)

T. Rowe Price Media
& Telecom


14.7% (Nasdaq: AMZN)
Google (Nasdaq: GOOG)

Meridian Value (MVALX)



Intel (Nasdaq: INTC)

Vanguard Capital Opportunity* (VHCOX)



Research In Motion (Nasdaq: RIMM)
Biogen Idec (Nasdaq: BIIB)

Data from Morningstar. *Fund is closed to new investors.

Find some great funds
The choice is yours. You can do well over the long haul investing in a simple broad-market index fund, in which case, you should seek out a low expense ratio. This requires very little effort and tops many other approaches.

But to aim higher than the market's average return, you might want to find some top-notch mutual funds for some of your investing money.

Our Motley Fool Champion Funds newsletter has ideas on funds that can beat the market. Its picks are beating their respective benchmark indexes by 22 percentage points. A free trial includes full access to all past issues, so you can read about each recommendation in detail.

Longtime Fool contributor Selena Maranjian owns shares of an S&P 500 index fund. Intel is a Motley Fool Inside Value recommendation. Google is a Rule Breakers recommendation. Biogen Idec and are Stock Advisor picks. The Fool owns shares of SPDRs. The Motley Fool is Fools writing for Fools.