Morningstar's Number One Fund Of 2025 Is Revealed And The Expense Ratio Is A Huge Turnoff

Whether you're investing for retirement or simply hoping to grow your overall portfolio, investing in mutual funds is one of the secrets the wealthy use to grow their fortunes. Mutual funds are a popular investment tool, as the Investment Company Institute (ICI) estimated $29.11 trillion was held in mutual funds in 2025 in the United States. They give people an easy way to reduce the risk of stock market volatility through diversification of holdings. When you purchase a mutual fund, its manager buys stocks, bonds, and other types of investments, and you get partial ownership of each of these assets.

According to Statista, more than 7,000 mutual funds were available for purchase in the United States in 2024. Investment professionals try to make it easier for you to select a mutual fund to invest in by ranking performance. For example, Morningstar uses independent research to create tools and strategies for individuals who want help deciding what investments they should make.

Morningstar's investment rankings for 2025 recently came out (via PR Newswire), and Dynamic Wealth Group's Dynamic Alpha Macro Fund (ticker: DYMIX) received the number one ranking for the second straight year in the Morningstar category for macro trading. DYMIX had a 2025 return of 25.36% and has had an impressive 20.37% return since its inception in mid-2023. However, DYMIX also has a high expense ratio of 1.81%, which is one of the biggest downsides of a mutual fund. Such expenses eat away at your returns more significantly than you might think.

One of the best tips for investing in stocks as a beginner is to use mutual funds. Beginners don't have to learn how to research individual stocks when they rely on mutual funds, yet they can invest in multiple stocks at once with less risk. Owning individual stocks comes with more volatility in price movement.

When investing in mutual funds, though, you need to pay attention to the expense ratio. This is the fee that the investment company charges to manage, market, and operate the fund. Professionals calculate the expense ratio by dividing the expenses required to operate the fund by the total amount of assets it holds.

According to Fidelity, the average mutual fund expense ratio in 2024 was around 0.4% for equity mutual funds and 0.38 for bond mutual funds. For an actively managed mutual fund, Investopedia reports that an expense ratio of between 0.5% and 0.75% is considered desirable. Any actively managed option with a ratio of more than 1.5% — such as the Dynamic Alpha Macro Fund's 1.89% ratio — would be considered high. For a passively managed index stock fund, you might pay less than 0.1% in expense ratios, according to Bankrate. Some of these index mutual funds charge nothing. Because of low operational costs and expense ratios, the ability to quickly cash out, and the option of matching returns in specific market sectors, index mutual funds can be an investment option that makes sense for retirees.

Mutual fund companies deduct expenses each year from the total assets held based on the ratio calculation. If one mutual fund has a 1% expense ratio and another has a 0.4% expense ratio, the first one would have to outperform the second one to make up for its higher operating expenses. After 10 years, the first fund's annual higher expense ratio means it would need a significantly higher return to match the second one's growth.

Considering the DYMIX's expense ratio is 1.81%, it needs to maintain a strong level of return to stay ahead of the far cheaper index funds. In 2025, DYMIX outperformed the S&P 500 Index (which is a common type of index fund you can invest in) 25.36% to 17.9% in returns. However, you lose some of that gain to the high operating expenses found with DYMIX compared to an average S&P 500 index fund, some of which charge nothing.

Should you ever invest in a mutual fund with a high expense ratio? If you want an actively managed option instead of a passively managed one, you'll pay higher fees. Additionally, if you're investing in a newer mutual fund, the expense ratio might be higher at first until it has more assets under management (AUM) that naturally reduce the ratio. DYMIX is a newer investment vehicle, established in mid-2023, with about $200 million in AUM. Mutual funds could have anywhere from $10 million to $50 billion in AUM.