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The trend is clear: Investors continue to seek out lower fees for investment funds.
The mass migration to cheaper funds has been a key driver of falling costs, according to Zachary Evens, a manager research analyst for Morningstar.
Average annual fund fees have more than halved in the past two decades, to 0.36% in 2023 from 0.87% in 2004, Evens wrote.
And when it comes to fees, exchange-traded funds often beat their mutual-fund counterparts, experts said.
The average ETF carries a 0.51% annual management fee, about half the 1.01% fee of the average mutual fund, according to Morningstar data.
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Here’s a look at other stories offering insight on ETFs for investors.
Some experts say comparing average ETF fees to those of mutual funds isn’t quite fair, because most ETFs have historically been index funds, not actively managed funds. Index funds are generally cheaper than active ones, which employ stock-picking tactics to try and beat the market; that means average ETF fees are naturally lower, experts said.
However, there’s a similar fee dynamic when comparing on a more apples-to-apples basis.
To that point, index ETFs have a 0.44% average annual fee, half the 0.88% fee for index mutual funds, according to Morningstar. Similarly, active ETFs carry a 0.63% average fee, versus 1.02% for actively managed mutual funds, Morningstar data show.
Investors pay this fee — a percentage of their fund holdings — each year. Asset managers pull it directly from client accounts.
“There are so many things you can’t control in investing,” said Michael McClary, chief investment officer at Valmark Financial Group. “The one thing you can control is fees.”
“I think it’s one of the key things people should care about,” he said.
‘Cheap mutual funds also exist’
ETFs and mutual funds are similar. They’re both baskets of stocks and bonds overseen by professional money managers, and offer ways to diversify your investments and access a wide range of markets.
ETFs are newer. The first U.S. ETF — the SPDR S&P 500 ETF Trust (SPY), an index fund tracking the S&P 500 stock index — debuted in 1993.
Mutual funds hold more than $20 trillion, about double the assets in ETFs. But ETFs have steadily increased their market share as investor preferences have changed.
While ETFs tend to be cheaper, on average, that’s not to say mutual funds are always more expensive.
“Cheap mutual funds also exist,” said Bryan Armour, director of passive strategies research for North America and editor of the ETFInvestor newsletter at Morningstar.
For example, some index mutual funds, like those that track “major” indexes such as the S&P 500, have competitive fees relative to similar ETFs, Armour said.
“It’s really just the core indexes where mutual funds compete more directly with ETFs on fees,” Armour said. “Other than that, I’d say ETFs are, generally speaking, cheaper.”
And, fees for newly issued mutual funds are declining while those of new ETFs are increasing, data shows.
The “fee gap” between newly launched mutual funds and ETFs shrank by 71% in the last decade, from 0.67% to 0.19%, according to Evens of Morningstar.
That’s largely due to “the emergence of active and alternative ETF strategies, which tend to be pricier than broad index strategies,” he said.
Stock traders on the floor of the New York Stock Exchange.
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Many large U.S. companies have seen their stocks swell since the presidential election.
The top 10 performing stocks in the S&P 500 index saw returns of 18% or more since Election Day, according to data provided by S&P Global Market Intelligence, which analyzed returns based on closing prices from Nov. 5 to Nov. 20.
Two companies — Axon Enterprise (AXON), which provides law-enforcement technology, and Tesla (TSLA), the electric-vehicle maker led by Elon Musk, an advisor to President-elect Donald Trump — saw their stocks gain more than 35%, according to S&P Global Market Intelligence.
By contrast, the S&P 500 gained about 2% over the same period.
‘Usually a bad idea’ to buy on short-term gain
Investors should be cautious about buying individual stocks based on short-term boosts, said Jeremy Goldberg, a certified financial planner, portfolio manager and research analyst at Professional Advisory Services, Inc., which ranked No. 37 on CNBC’s annual Financial Advisor 100 list.
“It’s usually a bad idea,” Goldberg said. “Momentum is a powerful force in the market, but relying solely on short-term price moves as an investment strategy is risky.”
Investors should understand what’s driving the movement and whether the factors pushing up a stock price are sustainable, Goldberg said.
Why did these stocks outperform?
Lofty stock returns were partly driven by Trump administration policy stances expected to benefit certain companies and industries, investment experts said.
Deregulation and a softer view toward mergers and acquisitions are two “key” themes driving bullish sentiment after Trump’s win, said Jacob Manoukian, head of U.S. investment strategy at J.P. Morgan Private Bank.
Relying solely on short-term price moves as an investment strategy is risky.
Jeremy Goldberg
portfolio manager and research analyst at Professional Advisory Services, Inc.
Additionally, U.S. regulators will likely be much less stringent about allowing potential mergers during Trump’s second term, experts said.
Companies in the streaming ecosystem — like Warner Bros. Discovery (WBD), which owns the Max streaming service, and Disney+ owner The Walt Disney Co. (DIS) — may be benefactors of looser rules around consolidation, they said.
Rosy earnings and AI
For some stocks, outperformance was tied to rosy quarterly earnings results or guidance that some companies reported around or after Election Day, experts said.
Many such businesses cited artificial intelligence as a growth driver.
For example, Palantir Technologies (PLTR), cited “unprecedented” demand for its AI platform in the third quarter, helping deliver “exceptionally strong” earnings, Treasurer and CFO David Glazer told investors Nov. 4.
Likewise, Axon beat analysts’ estimates in its Nov. 7 earnings results, with officials touting its “AI era plan” and raising earnings guidance, Goldberg said.
Axon and Palantir stocks were up 38% and 22%, respectively, from Nov. 5 to Nov. 20, according to S&P Global Market Intelligence.
Some companies benefited from a combination of policy and earnings, experts said.
Rows of servers fill Data Hall B at Facebook’s Fort Worth Data Center in Texas.
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Take Vistra Corp. (VST), an energy provider, for example. The company’s stock jumped 27% after Election Day.
Vistra is in talks with large data centers — or “hyperscalers” — in Texas, Pennsylvania and Ohio to build or upgrade gas and nuclear plants, Stacey Doré, Vistra’s chief strategy and sustainability officer, said on the company’s Q3 earnings call Nov. 7.
Tesla’s stock got an “Elon Musk premium” from Trump’s victory, said Goldberg of Professional Advisory Services.
Musk, Tesla’s CEO, was one of Trump’s top campaign backers. Trump tapped him to co-lead a new Department of Government Efficiency. Shares of the electric-vehicle maker soared 14% the day after the election and almost 30% by week’s end.
President-elect Donald Trump and Elon Musk talk ring side during the UFC 309 event at Madison Square Garden on Nov. 16, 2024 in New York.
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But Tesla stock has additional tailwinds, experts said.
For one, Trump wants to end a $7,500 federal tax credit for EVs. Scrapping that policy is expected to hurt Tesla’s EV rivals.
Tesla has also been developing technology for driverless vehicles. In Tesla’s recent earnings call, Musk said he’d use his influence in Trump’s administration to establish a “federal approval process for autonomous vehicles.”
The break from the bills is likely a relief to the many federal student loan borrowers enrolled in the Saving on a Valuable Education plan, known as SAVE. But it may also be causing them anxiety over the fact that they won’t get credit on their timeline to debt forgiveness.
For example, those also enrolled in the Public Service Loan Forgiveness program, who are entitled to loan cancellation after 10 years, have seen their journey toward that relief halted during the forbearance.
“Borrowers are frustrated about the delay toward forgiveness,” said higher education expert Mark Kantrowitz. “They feel like they’ve been waiting for Godot.”
Here’s what borrowers enrolled in SAVE should know about the delay to debt cancellation.
Delay could stretch on for months
In October, the U.S. Department of Education said that roughly 8 million federal student loan borrowers will remain in an interest-free forbearance while the courts decide the fate of the SAVE plan.
A federal court issued an injunction earlier this year preventing the Education Department from implementing parts of the SAVE plan, which the Biden administration had described as the most affordable repayment plan in history. Under SAVE’s terms, many people expected to see their monthly bills cut in half.
The forbearance is supposed to help borrowers who were counting on those lower monthly bills. But unlike the Covid-era pause on federal student loan payments, this forbearance does not bring borrowers closer to debt forgiveness under an income-driven repayment plan or Public Service Loan Forgiveness.
Adding to borrowers’ annoyance is that “those enrolled in the SAVE Plan were not given the choice of forbearance,” said Elaine Rubin, director of corporate communications at Edvisors, which helps students navigate college costs and borrowing. If borrowers want to stay in SAVE, they can’t opt out of this pause.
Borrowers enrolled in PSLF are especially concerned, Kantrowitz said. That program requires borrowers to work in public service while they’re repaying their student loans.
“They have been working in a qualifying job, but aren’t making progress toward forgiveness,” he said. “Some borrowers are working a job they hate, but are sticking with it in the expectation of qualifying for forgiveness. Others are close to retirement and don’t want to have to work past their normal retirement age just to get the forgiveness.”
What borrowers can do
Despite the delay toward forgiveness, there are still a few good reasons for borrowers to stay enrolled in SAVE, experts say. During the forbearance, borrowers are excused from payments and interest on their debt does not accrue.
Keep in mind: Even if you make payments under SAVE during the forbearance, your loan servicer will just apply that money toward future payments owed once the pause ends, the Education Department says.
If you’re eager to be back on your way to debt cancellation, you have options.
You may be able switch into another income-driven repayment plan that is still available. Under that new plan, you may have to start making payments again. Yet if you earn under around $20,000 as a single person, your monthly payment could still be $0, and therefore you might not lose anything by switching, Kantrowitz said.
Changing plans might be especially appealing to those who are very close to crossing the finish line to debt forgiveness and just want to see their balance wiped away, experts said. (You’ll likely be placed in a processing forbearance for a period while your loan servicer makes that switch. During that time, you will get credit toward forgiveness.)
The Education Department is also offering those who’ve been working in public service for 10 years the chance to “buy back” certain months in their payment history. This allows borrowers to make payments to cover previous months for which they didn’t get credit. But to be eligible for the option, the purchased months need to bring you to the 120 payments required for loan forgiveness.
“The buyback option might be eliminated under the Trump administration,” Kantrowitz said. “So, if you want to use it, you should use it now.”
Buying a dupe — short for duplicates — rose to the top of this year’s holiday wish-lists. A dupe gift is a gift that is a cheaper alternative to a more expensive, branded item. They were largely kept under the radar until recently because a “fake” was dubbed inferior to the real thing, but a lot has changed.
In some cases these brand imitators are now even preferred to their pricier counterparts.
This year, 79% of consumers said they would buy a dupe as a gift for their loved ones for the holidays, according to a survey of more than 1,000 shoppers by CouponCabin.
More than half — 51% — of those that the coupon site polled said dupes are betterthan the original.
Even when consumers can get the real thing, nearly 33% of adults intentionally purchased a dupe of a premium product at some point, a separate report by Morning Consult also found. The business intelligence company polled more than 2,000 adults in early October.
When is a dupe an appropriate gift?
Before you buy a dupe, think about who you’re shopping for, experts say.
For instance, some family members or friends might especially appreciate a dupe for what it is, said Ellyn Briggs, a brands analyst at Morning Consult.
“It’s kind of a badge of honor for young people to get a dupe,” she said.
On the other hand, you risk disappointing someone if they have been asking for a specific product for a while, said Melanie Lowe, CouponCabin’s savings expert.
If that is the case, consider the cost of the name-brand item and assess if it is within budget. The key is to know when to splurge or save, Lowe said.
“If you’re talking about a product that you’ll use daily… invest in the original,” Lowe said. “That purchase is usually worth it.”
Alternatively, “if it seems appropriate in the situation — if it is a more light-hearted gift — you can definitely go the dupe route,” she said.
‘It’s a dupe for a reason’
While some shoppers take pride in buying dupes, roughly 86% of shoppers have been disappointed by their purchase of a dupe, CouponCabin found.
“It’s a dupe for a reason,” said Lauren Beitelspacher, professor of marketing at Babson College. “We don’t know where it’s made, who is making it or the quality.”
“It’s not that all dupes are bad. But sometimes we are paying a premium because there is a quality difference — and we, as consumers, have to be more conscious of that,” Beitelspacher said.
If you want to shop for dupes, read and watch product reviews online to help determine the dupe’s quality — this is where social media can come in handy.
A majority, or 62%, of U.S. adults who use TikTok say they use the app for reviews or recommendations, according to a new study by the Pew Research Center. Others tap Instagram and Facebook for product research.
Shopping secondhand this season
Consumers should make the same value considerations when buying secondhand, which has also become more popular, even for gifting.
Three in four shoppers said that giving secondhand gifts has become more accepted over the past year — notching a 7% increase from the year before, according to the 2024 OfferUp recommerce report. OfferUp, an online marketplace for buying and selling new and used items, polled 1,500 adults in July.
The majority, or 83%, of shoppers are also open to receiving secondhand gifts this holiday season, the report found.
Shoppers have increasingly turned to resale for a number of reasons, including value, sustainability and as a means to secure hard-to-find luxury items. Because secondhand shoppingis considered eco-friendly, it’s also become more socially acceptable. OfferUp’s report credited Generation Z for driving a shift in mindset.
“The stigma around secondhand gifting is rapidly diminishing,” said Todd Dunlap, OfferUp’s CEO.
However, the same buyer-beware mentality applies, cautioned Babson’s Beitelspacher, especially if you are ordering secondhand goods online. “You might not get what you want,” she said.