US fund fees hold near record lows as investors keep shifting to cheaper options

A major factor in declining fund costs has been the migration toward no-load share classes, which generally exclude front-end sales charges and carry lower ongoing expenses. In 2025, 92% of gross sales of long-term mutual funds were directed to no-load funds without 12b-1 fees, nearly double the share seen at the start of the century.

The change coincides with the rise of fee-based advisory relationships and the growth of retirement platforms, where advisors are compensated directly rather than through embedded distribution charges. Do-it-yourself investors using discount brokerages or transacting directly with fund firms have also accelerated the shift.

The expansion of passive investing has played a central role in the broader fee decline. By the end of 2025, index mutual funds and index ETFs together accounted for 52% of long-term fund assets, up from 19% in 2010.

Because index portfolios typically require less trading and research than actively managed funds, they tend to charge lower expenses. Larger average fund sizes in passive strategies also help reduce per-investor costs through economies of scale.

ETF pricing trends reinforced the pattern. Asset-weighted expense ratios for index equity ETFs were unchanged at 0.14% in 2025, while bond ETF costs slipped to 0.09%, underscoring ongoing competition among sponsors and the benefits of asset growth.