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Eswar Prasad, a former head of the IMF's China unit now at the Brookings Institution, a Washington think-tank, has an ambitious idea that would see the fund charge premiums for supplying crisis insurance.
The Guardian has a partnership with Skipton Financial Services at guardianinvesting.co.uk, or call 0800 121 6836.* It offers 1,700 funds at no initial charge, then 0.5% a year plus the fund charge, typically 0.75%, making a total of around 1.25%.
First question for the index investor to ask: What does the fund charge in expenses?
Forbes asks: Have you considered the cost of ownership, that is, how much does the fund charge to manage your money?
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For instance, the average emerging-market fund charges 1.61 percent, and the average alternative fund charges 2 percent.
But the Vanguard Inflation-Protected Securities fund charges just 0.22percentt.
The average large-cap growth fund charges 1.22 percent.
That one fund charged shareholders $375 million in expenses last year.
Another leading fund charges no maintenance fee but 50% of profits.
It is very rare that any investment manager can justify the fees a fund charges.
The higher the fees a fund charges, the better it must perform simply to break even.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com