1Assumes a 6% annualized rate of return. The examples are hypothetical and are not intended to represent specific investment products. Dividends and interest are assumed to have been reinvested, and the examples do not reflect the effects of taxes.
2In general, indexed or passive funds have lower costs, while actively managed funds incur higher management fees. The asset-weighted average for all mutual funds, excluding money market funds and funds of funds, was 0.64% in 2014, according to Morningstar.
3The difference between the price a broker-dealer pays for a bond and the price at which it is sold to you is known as the bond’s markup. The markup is a transaction cost. With new issues, the broker-dealer’s markup is included in the par value, so you do not pay separate transaction costs.
4According to a July 2013 Patpatia & Associates, Inc. study on fixed income marketing and pricing practices.