130 | A Statement of Belief

In a world where most everyone wants most everything to be free, it's not surprising that investment strategies have been reduced to minimizing costs.

The expense ratio is a crude measurement of resources spent by a fund to generate investment returns.

And it has become the "whack-a-mole-hammer" for the do-it-yourself investor and the bane of existence for a fund manager in any investing conversation.

Contrary to popular belief, it does not represent fees that are arbitrarily deducted from returns by a fund manager or a financial advisor.

The expense ratio is only a back of the envelope calculation completed after the fact to summarize money spent by a fund visiting, meeting, analyzing, and administrating the actual investment in companies across the world.

The expense ratio is not someone else's "cut" of your returns.

This feels nuanced, but I think it's important.

Lower expense ratios have been found to correlate with higher returns, but they don't cause higher returns.

Finding the lowest expense ratio is more a statement of belief that effort and research don't lead to higher returns than it is a discount code to be used at checkout.

Of course, as costs go down, intentionality tends to decrease too, but that's a more nuanced conversation for another day.