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The Top 15 Wealth-Destroying Funds of the Last Decade

Morningstar’s list provides a cautionary tale for advisors looking to invest clients’ assets.

The last 10 years have been pretty good for the stock market; the S&P 500 index is up 167% since the beginning of 2013. In fact, mutual funds and ETFs created $11.1 trillion in shareholder value over the last decade, according to a recent Morningstar analysis.

Morningstar recently ranked the top 15 wealth-creating and wealth-destroying funds. No surprise, the wealth-creating funds come from large, well-established firms, and 10 of the 15 funds are low-cost passive index funds. Among the top wealth-creating funds are the Vanguard Total Stock Market Index fund, the SPDR S&P 500 ETF Trust, the Fidelity 500 Index fund, the iShares Core S&P 500 ETF and Invesco’s QQQ Trust.

Yet, some funds lost value for shareholders over that same period, Morningstar found. And while the wealth creators tended to be larger, plain vanilla funds, the wealth destroyers were smaller in size and more specialized.

In addition, 14 of the 15 wealth destroyers were exchange-traded products.  

“ETFs have many things going for them—including low costs, tax efficiency, and typically a passive investment approach that makes them suitable building blocks for diversified portfolios—but they also have a dark side,” said Amy Arnott, portfolio strategist at Morningstar and author of the research. “ETFs often focus on narrowly defined market sectors and asset classes, making them potentially dangerous when used by investors with a speculative bent.”

Take the ARK Innovation ETF, for instance. That fund destroyed an estimated $7.1 billion in wealth over the last 10 years, Morningstar found.

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