Fund Efficiency Score (FES)

Don’t waste your hard-earned savings. Invest efficiently.

The Fund Efficiency Score (FES) is a single number that measures the relative cost/benefit of investment funds. The number is derived by dividing a weighted average of returns over multiple periods by the expense ratio for each fund.

Why is this number important?  This number reflects the two most important variables in assessing investment performance:  cost and rate of return. It shows which funds and fund management companies do the best job making you money. As covered in my article, even funds with the same investment objective can perform very differently, potentially costing you thousands of dollars in lost value.

Which funds have the best FES? I applied the FES methodology to 243 exchange-traded funds (ETFs) offered by 34 different investment companies that passively invest in equities (stocks) using broad market indexes such as the MSCI total market, S&P, and Russell. I found:

  • A strong correlation between FES and fund expenses (your cost)
  • Certain investment categories performed better than others
  • Only four investment companies were above-average, and the performance of two investment companies clearly stood out.

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