According to a May 2014 WSJ article, after 30 years, a $200,000 mutual fund investment (8% gross annualized return) grows to $1.4 million after paying the typical mutual fund annual fee of 1.25%. This was the average expense ratio for mutual funds for 2013 (source: Morningstar). The same investment grew to $2.0 million if annualized returns were the same but a 0.04% annual expense ratio (source: ETF.com).
During the 2008 financial crisis, the average ultra-short bond fund lost 7.9% for the year; the Charles Schwab YieldPlus fund lost 35% (note: a lawsuit forced Schwab to pay a $119 million fine to settle SEC civil charges).
Alternatives vs. Traditional Stocks
For the first half of 2013, the correlation between the S&P 500 and alternative investments has increased—a trait not desired by most advisors. Correlation does not measure degree of movement. Instead it assigns a number between +1.0 and -1.0 to show whether two investments tend to move up and down together.