Markets · 6 pages · 12 min

Why a cheap fund can still be the wrong exposure

A low expense ratio prices the wrapper, not whether the holdings match the risk you meant.

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From the opening

A low expense ratio means the fund's wrapper is inexpensive to operate, and it says almost nothing about which risks the holdings carry. The portfolio can be the wrong market, the wrong industry, or the wrong kind of promise even when the fee line looks small. The opening covers fees do not describe holdings, a cheap sector is still a sector, and names can hide concentration.

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Inside

Fees do not describe holdings
A cheap sector is still a sector
Names can hide concentration
Match exposure before comparing cost
Where the idea stops applying
A distinction worth keeping

Sources

Portfolio exposure
Index fund tracking difference

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Why a cheap fund can still be the wrong exposure

From the opening

Inside

Sources

Also on the desk