Portfolio Comparisons, from Steve Ellison
I submit that high mutual fund management and load fees would have a much more direct and deleterious effect on investors' ability to catch the drift than stock options or executive compensation.
Consider two hypothetical investors, A and B, who each invest X dollars per year and earn a drift of 9% per year. A invests in index funds with annual expenses of 0.2%, while B invests in actively managed funds with annual expenses of 1.2%. At the end of 20 years, A's portfolio is worth 55X, while B's portfolio is worth 49X.
Now consider investor C, who every year switches into the previous year's best performing mutual fund and pays a 4% load to do so, in addition to the funds' 1.2% in annual expenses. At the end of 20 years, investor C's portfolio is worth only 31X.