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Investors Snub All But the Lowest-Cost Funds

Fund inflow data show that investors' preference for low-cost funds has been even stronger than expected.

Alina Lamy: A quick look at flows into open-end funds by fee level can give us an idea about just how important cost has become to investors, especially in the equity and fixed-income categories.

Morningstar’s Fee Level data point evaluates a mutual fund share class's expense ratio relative to other funds that invest in a similar asset class and have similar distribution characteristics. Then the funds within each comparison group are ranked into quintiles by expense ratio, from low (meaning least expensive) to high (most expensive).