Freakonomics, podcast "The Stupidest Thing You Can Do With Your Money"
BOGLE: If the market return is 7 percent and the active manager gives you 5 after that 2 percent cost, and the index fund gives you 6.96 after that four basis point cost — you don’t appreciate it much in a year — but over 50 years, believe it or not, a dollar invested at 7 percent grows to around $32 and a dollar invested at five percent grows to about $10. Think what an investor thinks about when he looks at that number. He says, “Wait a minute! I put up 100 percent of the capital. I took 100 percent of the risk and I got 33 percent of the return.” Well, anybody that thinks that’s a good deal, I’ve got a bridge I want to sell them. Here’s the reality: this is the business, the mutual fund, actively-managed business, where you not only don’t get what you pay for, you get precisely what you do not pay for. Therefore, if you pay nothing, you get everything.