Fund fees hit record low in 2024, but the rate of decline is slowing

From Yahoo Finance: 2025-05-16 08:00:00

Investors paid an average expense ratio of 0.34% in 2024, down from 0.36% in 2023, saving nearly $5.9 billion. The trend towards low-cost options continues, with the cheapest funds attracting $930 billion in inflows, while others experienced $254 billion in outflows, creating a $1.2 trillion flow gap.

The recent study by Morningstar shows a slowdown in fee reductions for index funds, as many approach zero. Passive funds’ fees fell by 1.5% to 0.11%, while active funds saw a 1% decline. The cheapest funds have cut fees by 50% in 15 years, while the most expensive only reduced by 19%.

Vanguard remains the low-cost leader with an expense ratio of 0.07%, followed by State Street’s SPDR (0.12%), iShares (0.16%), and Dimensional Fund Advisors (0.25%). ETFs remain cheaper than mutual funds, with new ETF fees rising slightly since 2015, while new mutual funds are cheaper than in the past.

Strategic-beta funds balance active and passive management with an average fee of 0.16%, higher than traditional index funds (0.10%) but lower than active funds (0.59%). The data from Morningstar point to investors’ continued preference for low-cost options reshaping the industry and accruing billions in savings to portfolios.

Read more: Fund Fees at Record Lows but Decline Is Slowing: Morningstar