Fund Investment - Fee

Expense ratio:
ETF - 1%
Fund - 1-5%
Hedge Fund - 2%+20%

We can view the expense of ETF as pure adminstration fee (custodian, rental, back-office etc.). No payment for investment intelligence.

The 2% fee for hedge fund is of the same nature as above. Except, of course, the high-end hedge funds inevitably have higher admin fees (rental in class A buildings, promotion dinners at clubs, business trips)., which is also justifiable.

Whether the 20% performance is suitable for investors depends on your portfolio, your need, and your investment philosophy. No comment here.

Now, comes the main topic today.

Traditional funds commonly invest 90% in broad index stocks and the rest on a discretional basis. That means, the active portion of investment, which generates alpha, is only 10%. But it charges much higher fees than ETF. This is call "dead weight".

Clearly, traditional funds are not a good choice for ordinary investors in terms of fee charged, regardless of the headache in the process of selecting funds.