Yes, all reported returns are net of expenses. (One of the few things in the investment business that seems honest). The Schwab representative is correct. What you see is what you get--or, rather, what you see is what investors got. IF they stayed invested over the reported time period, of course.
Just to get you oriented. "Mutual funds" is the big category. Mutual funds may invest in bonds or stocks or both and in other things as well. "Bond funds" are mutual funds, mutual funds that invest in bonds. Traditionally mutual funds are "actively managed" (someone picks a portfolio of what they think are the best stocks). John C. Bogle, for whom this forum is named, created the first "index fund." Index funds are "passively managed" and track a mathematical average or index of all the stocks or bonds in some broad category, like "the total U. S. stock market."
If you run a fund screener or read articles about mutual funds or look at the funds in a typical 401(k), it looks as if the actively managed funds do succeed in beating the index funds, and, yes, the results are after expenses. A common phrase you will hear from people touting actively managed funds is "why would you care about expenses if you are getting higher returns after expenses?" The implication is something like this: the active fund managers can really do it, they can earn 2% or 3% above the index by choosing the best stocks, so even after they take a well-earned 1% for themselves, they are giving you another 1% or 2% or more.
Actively managed funds are going to be different from the index, some will do better, some will do worse. If you run a fund screener, then obviously you are going to find the ones that do better. If you read magazine articles, they are only going to talk about funds that have done better. If you look in your 401(k) plan, the plan managers usually remove funds that haven't done well and add new ones that have, so the fund is always full of four- and five-star funds. In other words, you are typically looking at active funds that have have good past performance. The thing that is really really really hard to believe but true is that past performance does not predict future results.
Another piece of phonus-balonus that you need to watch out for is manipulation of risk. It is usually possible to get higher performance by taking higher risk. Without having any real selection skill, a manager can pick categories of stocks that are more volatile than average. The result will be a mutual fund that rises faster than the market when the market is rising--but crashes farther than the market when the market crashes.
Last edited by nisiprius
on Thu May 02, 2013 6:02 am, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.