How would you like to save $4,885 a year in retirement?

Maria Bruno, a Vanguard investment analyst, shows how it can be done on the mutual fund operator's website: www.personal.vanguard.com. She cites the hypothetical case of someone with a $500,000 portfolio of mutual funds.

If the funds have an expense ratio of 1.19 percent -- the industry average, Ms. Bruno writes -- the retiree's cost of holding those funds for a year would be $6,055.

But if the portfolio's expense ratio was 0.23 percent, the costs would be $1,170, or $4,885 less.

Many investors might not think savings of that magnitude are possible.

"As cost conscious as consumers are, I'm surprised that most of the time the fee discussion doesn't start up front," said Michael Blehar, a financial consultant with Fort Pitt Capital in Green Tree. "People need to be aware of what the costs are because there are still people out there who are charging way too much."

Costs are just one factor investors must consider. Others include their investment objective and risk tolerance, as well as taxes if you're investing outside a tax-advantaged account. None of those should be given short shrift. Neither should costs.

"Having the proper ratio of stocks to bonds, relative to your goals and risk tolerance, would be the most important consideration. Costs would be a close second," said James Zalenka, a certified financial planner with BaranJames Co. in Scott.

If you're using mutual funds to save for retirement in a 401(k) or IRA account, expenses will come from a couple of sources. You may have to pay a sales charge -- or load.

But even if you use no-load funds, you have to pay the costs of managing, administering and marketing the funds. Those costs are expressed as an expense ratio based on what percentage of your account's assets is deducted to cover those costs.

Using Mr. Bruno's example, an average fund charges 1.19 percent -- or $119 for every $10,000 you have invested. Expense ratios are detailed in a fund's prospectus, which can be found at the fund's website. Morningstar and similar websites also provide them.

Fund expenses depend on how managers work and what they invest in. Some managers are "passive," just trying to match the performance of the broad stock market by investing in all the stocks in indexes such as the S&P 500.

Index funds have lower expenses than so-called "active" funds run by managers who believe they possess the stock-picking prowess to outperform the market. Active managers spend more time and money researching stocks, costs investors must cover. They also trade more frequently than index managers, which also adds to their expenses.

Index funds did better in the bull market of the 1990s. But active managers have an easier time outperforming the market when picking winners involves little more than throwing darts at the stock tables.

"If you expect the market to be bearish, you may want to be more active in terms of stock funds," said Michael Saghy, director of investments for PNC Wealth Management.

Funds that invest in predominantly big U.S. companies typically have lower expenses than funds that invest in small or medium-sized companies or companies in overseas markets.

"For an actively managed, retail large cap mutual fund, investors should be able to find a quality fund with an expense ratio of 1.3 percent or less," said Patrick W. Fisher of Schneider Downs Wealth Management Advisors in Pittsburgh.

A Securities and Exchange Commission online calculator (www.sec.gov/investor/tools.shtml) demonstrates how much fund fees will cost over the life of an investment.

Plug in how much you plan to invest, how long you will be invested, what you expect in the way of returns and the fund's expense ratio, and you'll get the cost of holding the fund over that period. The cost includes fees, as well as earnings you'll miss out on by paying those fees.

A recent Vanguard study shows more investors are paying more attention to costs, in part because advisers and employer-sponsored 401(k) plans are steering them to lower-cost funds.

However, cost can't be an investor's only consideration. A higher-cost fund may generate superior returns that make it a better choice.

"If the fund manager has proven to add value on a consistent basis, there may be reason to pay a somewhat higher expense ratio in return for that fund manager's skill," Mr. Fisher advised.

As with many questions in life, there is no simple answer. Choosing a fund involves doing your homework, weighing all the factors and making an informed decision. After that, it's a matter of trusting your judgment -- even in chaotic markets. That's hard for many investors to do, especially these days when rumors that Hungary is the next Greece send skittish investors scurrying for cover.

"With all the headline risk they see, they forget about the nuts and bolts," Mr. Saghy said.

Most investors would be better served, he advised, by focusing on fundamentals of investing, rather than worrying about what tomorrow's headlines will bring.

"Money Q&A" and "Company Town" are featured exclusively at PG+, a members-only web site of the Pittsburgh Post-Gazette. Our introduction to PG+ gives you all the details.