Vanguard ETF Study: Low Cost Rules

By Tom Lydon,

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It's a fact that millions of exchange traded fund ( ETF ) investors have long suspected: when it comes to investing, cost is king. That's according to a study recently wrapped up by Vanguard .

In short, the study reveals that funds that cost the least managed to lure the most investor dollars in the period from 1999-2009. But those results are exclusively limited to ETFs: both low-cost equity mutual funds and ETFs garnered 86% of the net cash flow. [ ETF Assets Flower in April. ]

Low-cast bond funds gathered 78% of the net flash flow. Low-cost ETFs alone attracted 59% of the net cash flow, report Steve Dew and Olivier Ludwig for Index Universe . "Low cost" for purposes of the study was defined as funds with fees and expense ratios that place them in the lowest quartile of all U.S. funds.

Vanguard noted that its study likely highlights an investor shift in focus now that returns over the last decade have been flat while volatility has risen. [ Vanguard Fires ETF Pricing Shot. ]

For more stories about the growth of the ETF industry, visit our ETF Performance Report category .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing ETFs
Referenced Stocks: ETF

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