This question is in the context of securities held within a 401k.
As I understand it, one of the advantages of a retirement target date fund (like Fidelity's FFFHX, which I am in 100%) is that the fund automatically adjusts its holdings to become more conservative as the target date approaches. This fund has an expense ratio of 0.77%.
For comparison, I looked at two other funds available in a Fidelity 401(k) - the Spartan 500 Index Fund (FUSVX - expense ratio of 0.03%) and the Spartan U.S. Bond Index Fund - Fidelity Advantage Class (FSITX - expense ratio of 0.17%).
Assuming I were to be comfortable regularly (yearly-ish?) rebalancing my portfolio both by changing the percentage of my 401(k) contributions in each fund as well as rebalancing principal as I grow closer to retirement, there seems to be an advantage in this "do it yourself" approach with regards to fees.
However, what about taxes? This is something I can't quite wrap my head around. If I rebalance regularly I would expect to incur some sort of tax liability. On the other hand, if I invest in a fund which rebalances itself automatically, would there be any tax implications for me when the fund rebalances? As a result, are such funds a better bet when it comes to taxes?
Ultimately, is there a way to calculate whether a self-reblancing fund with a higher expense ratio that (may) shield me from taxable events (in rebalancing) is worth the premium?