Index Fund "Price War" Shows Low Costs of Investing

June 1, 2000

The Wall Street Journal reported May 12 on a "price war" breaking out in the index fund segment of the investing market. Barclays Global Investors is looking to establish a larger presence in the huge U.S. index fund market by cutting management costs 50 percent below that of market leader Vanguard, whose fees already total less than one fifth of one percent of assets managed. The new Barclays S&P 500 fund will offer a fee of just 0.08 to 0.10 percent of assets managed, meaning that an investor holding $100,000 would have to pay only $1.53 per week for management services.

Opponents of personal retirement accounts cite high management costs as an obstacle to reform. Index funds are a simple, low cost way for even beginning investors could obtain diversification and high returns on the payroll taxes invested in their personal accounts.

For more information, see "Administration Costs and the Relative Efficiency of Public and Private Social Security Systems," by Robert Genetski.

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