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Fees Matter

A Morningstar analyst, Russel Kinnel, reports in his recent book, Fund Spy, on the effects of mutual fund fees. In an Advisor's Edge Report (June 2009), Esko Mickels reports: "There's also a strong relationship between costs and survivorship, which compounds the negative attributes of high-cost funds. For instance, with U.S. taxable bond funds, Kinnel found funds in the most expensive quartile had a much greater rate of closures and mergers (57%) than those in the least expensive quintile (35%) over 10-year rolling periods since 1995. Not only are investors paying a lot, they also risk having their fund close on them.