Inherent in most tools is their neutral nature. They’re neither good nor bad. It’s how they’re used that determines their effectiveness. Use a hammer to build a birdhouse and it’s a “good” tool. Use it to bash in your neighbor’s skull and it’s a “bad” tool.
Tools also come with a multitude of features. Again they’re neither good nor bad but how they’re perceived that makes the determination. A hammer with a rubberized handle is comfortable and, therefore, “good” while one with a wooden handle is “bad” because it’s uncomfortable.
When it comes to investing cost is an important (but we argue overrated) factor. An “expensive” investment is “bad” while “good” investments are “inexpensive.” True? Maybe. What about an “expensive” investment where performance justifies the cost? After all isn’t the NET (the cost-adjusted return) more important?
If you’ve been an Apollo client for some time (and, if so, thanks) you’ve no doubt heard this spiel. Thanks for drinkin’ the Kool-Aid! If, however, the NET concept is new and scary and you’d rather focus on the pabulum of “buy the least expensive investment possible” then enjoy these 32 pages from Morningstar that seek to debunk the myth that ETFs are always less expensive than index funds.
And remember…operating/administrative cost is but one type of cost. It’s obsessed over because it’s transparent and easy to measure. Tracking error, commissions, bid-ask spreads and tax efficiency all add to the cost equation.
Caveat Emptor!