Both Mutual Fund & ETF Fees Declined Again in 2025

While performance comes first when it comes to funds, fees are nothing to sniff at. Even a few basis points can make all the difference at the end of a year or during retirement. In a piece of good news for advisors, mutual fund and ETF fees fell overall again in 2025. They stayed around historic lows as more and more ETFs and mutual funds compete for assets.

See more: Holding Cash in Money Market Funds? You May Be Missing Out

The report by the Investment Company Institute (ICI), released Wednesday, found that all wrapper and style combinations have seen fees decline on average since 2017. Active and passive mutual funds have seen average fees decline over the last three decades. Average ETF fees, meanwhile, have fallen significantly since 2017, the report, “Trends in the Expenses and Fees of Funds, 2025,” said. 

“The long-term decline in fund expense ratios reflects strong competition and economies of scale across the industry, as well as investors’ increasing preference for lower-cost funds,” said Shane Worner, ICI’s senior director of industry and financial analysis. “As assets have grown and new entrants and products have expanded the marketplace, firms have reduced costs and delivered more cost-effective investment options to investors.”

Specifically, the report found that from 1996 to 2025, average expense ratios dropped 62% equity mutual funds. They dropped 57% for bond mutual funds. Meanwhile, expense ratios for index equity and bond ETFs have decreased by 33% and 50%. Its analysis uses asset-weighted average expense ratios to make its comparisons.

Fund and ETF Fees Continue to Drop Year Over Year

According to the report, a few key factors have contributed to declining fees for mutual funds. Those include the closure of expense funds and the arrival of lower cost funds. Assets moving from more expensive to cheaper funds, too, impacted the report’s data analysis. The mutual fund and ETF fees analysis emphasized that asset movement as a particularly important factor. 

“An important aspect of this development has been that an increasing share of fund assets are held in no-load share classes, which tend to have below-average expense ratios,” the report said. It pointed to the growth of cheaper index fund investing as another factor.

Some notable low ETF fees come via funds like the State Street SPDR Portfolio S&P 500 ETF (SPYM), which charges just two basis points (bps) for a reasonably broad equity portfolio. The Avantis U.S. Equity ETF (AVUS), meanwhile, charges only 15 bps for its active approach.

“Advisors and investors should conduct further due diligence than a fund’s expense ratio, as what’s inside the fund matters,” said VettaFi head of research Todd Rosenbluth. “However, it is great to see many people benefit by choosing low cost products. Many firms are using their scale to bring costs down and allow more money to be invested in stocks and bonds.”

Originally published on Advisor Perspectives

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