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High Fees Seen as Driving Investors Away from Funds

Fund firms have earned more in fees than investors have gained from the funds themselves in recent years, and investors may choose to invest, instead, in low-fee, exchange-traded funds as an alternative, according to a recent report by

"The benefits that funds used to offer are no longer valid," said Max Rottersman, author of the report, adding that investors can achieve diversification via exchange-traded funds. He also noted that investing in individual stocks may become more appealing since brokerage fees have dropped from several hundred dollars to well below $100 at some discount brokerages.

Further supporting his theory of the increased indifference to the fund industry, the report showed a mere $14 billion in net new sales throughout the whole of 2001. Last year, equity mutual funds lost $10 billion, although due to a record $130 billion into bond funds, mutual funds of all types wound up with a net $72 billion (see MFMN 1/21/03).

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