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For my 401k my employer offers 49 different investment options. The default option is the FID FREEDOM K 2055 (FDENX) which I have been in for the past year. I recently dug around checking out all the options for the first time, and I noticed the PYR INX LFC 2055 X has virtually the same exact returns, but the expense ratio is 0.1% as opposed to the 0.66% of the FDENX fund.

I changed 100% of my investments to go to the 0.1% option being that all the return categories were equivalent and it is the same year target date fund. Would there be any reason this would have been a bad decision?

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It appears that FDENX charges 0.05% for its own expenses, but has additional 0.61% expenses from the underlying funds. This is because, as most target date funds, it doesn't invest directly in stocks but rather invests in other Fidelity funds - that also charge expenses.

The Pyramis fund may be avoiding these charges by managing it's assets directly and not through other funds, or by investing in other Pyramis index funds without additional overhead.

0.66% for a target date fund is quite a lot, I must say.

  • Ok thanks for the info. So you think it was probably a good idea to swap to the pyramis then I assume. – Adam Johns Jul 3 '14 at 3:56
  • If you are comfortable with adjusting your assets at least once a year, there's no reason to get a high expense ratio mutual fund if a low expense ratio ETF with a similar exposure is available. Are FXSIX or IVV available under your plan? – IceArdor Jul 3 '14 at 9:29

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