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Notices
Bridge over ocean
1 March 2013 Financial Analysts Journal Volume 69, Issue 2

The Arithmetic of Investment Expenses

William F. Sharpe

Recent regulatory changes have brought a renewed focus on the impact of
investment expenses on investors’ financial well-being. The author offers
methods for calculating relative terminal wealth levels for those investing in
funds with different expense ratios. Under plausible conditions, a person saving
for retirement who chooses low-cost investments could have a standard of living
throughout retirement more than 20% higher than that of a comparable investor in
high-cost investments.

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