When Vanguard Founder Jack Bogle introduced the first index fund, the idea was to provide everyday investors with access to the markets at low cost. But some funds out there in the universe don’t deliver on that.
Some charge as much as 2 percent for market exposure that investors can now get from Vanguard, State Street, and others for a small handful of basis points.
So why are many investors still in these funds? Many investors may not know how exorbitant the fees are; perhaps their broker sold clients into the fund years ago and there they remain out of sheer inertia—and the continuing payout of trailing commissions from 12b-1 fees. Others may be stuck in a high-fee index fund on their 401(k) menu, with little choices.
Here are the 10 worst offenders, according to Morningstar data. These are market cap-weighted, long-only index funds that track the S&P 500. It does not include funds that go short or use leverage. The AUM represents all share classes. The data is as of Oct. 31, 2018.