The title of the 1985 song “Money for Nothing” by Dire Straits is a reference to the rock stars of this group achieving a wealthy status for doing easy work by playing music for people. Some mutual funds and exchange-traded funds, or ETFs, also derive easy money through a process called securities lending.
In his 1973 book, A Random Walk Down Wall Street, economist Burton Malkiel contended that higher cost, actively managed mutual funds were flawed and unlikely to beat low-cost, passively managed index funds. Following the publication of Malkiel’s book, there were dozens of studies touting similar benefits associated with low-cost, passively managed index funds. Today, index funds are rising in popularity, and many investors blindly rely on them without truly understanding what differentiates one index fund from another.
In our experience, when investors come in for an initial meeting with us most do not completely understood the total costs of the mutual funds they own.
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