AAII Investor Update: Index Fund Expense Ratios May Be Bottoming Out

For those of you who are big on index funds, here is the latest and greatest from the AAII.  

Thursday, October 12, 2023

Index Fund Expense Ratios May Be Bottoming Out

Raymond Rondeau will share invaluable insights, unveiling “Effective Timing and Execution Approaches for Today's Markets” and potent “Wealth-Building Strategies” at the MoneyShow on October 31, 2023! Plus, dive deeper with a special MoneyMasters course, “Evidence-Backed Strategies for Today's Markets,” available for an additional fee. Click here for more information. The Wall Street Journal recently speculated that expense ratios for the major index funds have reached the bottom. The call followed State Street's reduction in the expense ratio for the SPDR Portfolio S&P 500 ETF (SPLG). The expense ratio was cut by a single basis point from 0.03% to 0.02%. This translates to savings of $0.10 per year on every $1,000 invested. At this level, the move is more about bragging rights for State Street than it is about savings for investors.

SPDR Portfolio S&P 500 is the smallest of the four exchange-traded funds (ETFs) that directly track the S&P 500 index. Its assets under management (AUM) totaled $19.4 billion at the end of September. Its better-known brother, the SPDR S&P 500 ETF Trust (SPY), had AUM of $401 billion at the end of September. SPDR S&P 500's expense ratio is comparatively pricey but still cheap at 0.09% ($0.90 on every $1,000 invested).

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