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Makin' Money

Yes, read the fine print

Chris Farrell Nov 10, 2010

This comes under the category of, Duh. But it’s also a good reminder. New research from the folks at Wharton shows that mutual fund investors don’t read the fine print in a mutual fund prospectus. The neglect does cost money:

The research comes out of India. In 2006, India decided to change, twice over the course of three years, the way mutual fund fees were charged. Wharton business and public policy professor Santosh Anagol and PhD student Hoikwang Kim analyze what happened during this period in their recent study, “The Impact of Shrouded Fees: Evidence from a Natural Experiment.” The money quote:” This paper contributes to a small but growing literature arguing that people simply don’t pay attention to fees when making these kinds of decisions,” Anagol says.”

Fees matter. Fees compound over time. It pays to be a fee hawk.

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