For investors, keeping expenses low helps boost returns. For example, a typical foreign-stock mutual fund has an expense ratio of about 1.35 percent per year. IShares MSCI EAFE, the most popular exchange-traded fund (ETF) for foreign stock investing, has an expense ratio of only 0.35 percent. (ETFs are sold like stocks, with a brokerage charge to buy or sell, typically in the $10 to $20 range at a discount broker.)
If you invest $100,000 in a foreign-stock ETF with an 0.35 percent expense ratio, it will grow to around $335,000 at 12 percent over ten years, vs. only $300,000 if invested in a typical foreign stock mutual fund with a 1.35 percent expense ratio. Your total amount would be about 10 percent higher as a result of the reduced expense ratio.
What if you don’t have $100,000 to invest? Smaller amounts can be invested in no-load mutual funds on a regular basis until you have, say, $10,000 or more. Then the larger amount can be invested, all at once, in a low-cost ETF. This will prevent you from paying sales commissions on smaller trades.
