Mutual funds expense ratios are at the bottom for the 5 years period

According to report by research firm Lipper Inc mutual funds expense ratios are decreasing during 4 consecutive years with average reduction of 0.036% industrywide. The decline in 2008 was the largest reduction beginning from 2004, when the firm started to report.

As Lipper said an expense ratio of the average actively managed mutual fund fell to 0.712% in 2008 comparing to 2007’s 0.748%. That is to say that investors paid $3 billion less than they would have paid compared with 2007 expense levels.

The asset-weighted average total expense ratio for fixed-income funds also fell to 0.455% in 2008 in comparison with 0.481% in 2007, according to Lipper.

The asset-weighted average total expense ratio for equity funds to the contrary increased to 0.94% in 2008. In 2007 the same ratio was slightly less - 0.937%.

Index funds, including ETFs, had an average expense of 0.262% last year, down from 0.263% in 2007. Expense ratios for them are expected to remain the same in the current year due to market competition, according to report.

As report said, expense ratios for many actively managed mutual funds generally are expected to rise in 2009 because of an increase in fund non-management expenses, which include transfer agency, custodian and audit expenses.