Mutual Fund ROI (It's not what you think)
No one wants a transparent money manager, in the sense of not adding value. ETFs and Indexes are available to match performance with market averages. No, we want returns above and beyond those. Funds should have incremental (relative) returns that exceed fund incremental costs, significantly. Otherwise, why would we pay so much for funds? We could compile a list of all funds and their true diversification scores. We could also measure the true Return on Investment (ROI) of each fund's incremental returns. This is not unlike calculating the ratios for publicly traded companies, to assess the performance of one versus another, in making investment decisions. One might say "my fund's ROI was 20%, because I put in $10K and it grew to $12K". Let's assume the market returned 10%. Your $12K is in comparison to $11K, so your relative return is $1K or 10%. If you cash out you'll be paying a redemption fee. You probably paid a sales commission up front and there were pr...