17

You absolutely should consider expenses. Why do they matter when the "sticker price" already includes them? Because you can be much more certain about what the expense ratio will be in the future than you can about what the fund performance will be in the future. The "sticker price" mixes generalized economic growth (i.e., gains you could have gotten from ...


13

YES.. Management fees cut directly into your profits. A fund which achieves 8% growth but costs 1% to maintain delivers only 7% to you. Compounded over years, even a relatively small difference can add up to a significant amount of money. This is one of the advantages index funds have. They may not be as "sophisticated" as human-managed funds, but their ...


11

I hope a wall of text with citations qualifies as "relatively easy." Many of these studies are worth quoting at length. Long story short, a great deal of research has found that actively-managed funds underperform market indexes and passively-managed funds because of their high turnover and higher fees, among other factors. Literature Longer answer: Chris ...


11

I find it best to go to the horse's mouth (i.e. the company that operates the fund, in this case Vanguard): Extended Market ETF 0.16%


9

From The Prospectus for VTIVX; as compared to the Total Stock Market Fund; You can see how the Target date fund is a 'pass through' type of expense. It's not an adder. That's how I read this.


9

The answer depends on your spending habits and priorities and many other factors. However, just on the basis of the numbers you give, the simple answer would be no. The difference in cost of living between Madison and San Francisco is almost certainly more than the roughly 25% increase in your salary. This is assuming you actually mean San Francisco and ...


9

Should you care? From Vanguard: The long-term impact of investment costs on portfolio balances Assuming a starting balance of $100,000 and a yearly return of 6%, which is reinvested Check out this chart, reflecting the impact of relatively small expense ratios on your 30 year return: All else being equal you should very much care about expense ratios. ...


9

Over the past five years, QFVOX has returned 13.67%, compared to the index fund SPY that has returned 50.39%. SEVAX has lost 23.96%. AKREX has returned 81.82%. In two of your three examples, you would have done much better in an index fund with a very low expense ratio as suggested. While one can never, as you see, make a generalization, in almost every ...


8

If you read Joel Greenblatt's The Little Book That Beats the Market, he says: Owning two stocks eliminates 46% of the non market risk of owning just one stock. This risk is reduced by 72% with 4 stocks, by 81% with 8 stocks, by 93% with 16 stocks, by 96% with 32 stocks, and by 99% with 500 stocks. Conclusion: After purchasing 6-8 stocks, ...


8

In almost every circumstance high expense ratios are a bad idea. I would say every circumstance, but I don't want backlash from anyone. There are many other investment companies out there that offer mutual funds for FAR less than 1.5% ratio. I couldn't even imagine paying a 1% expense ratio for a mutual fund. Vanguard offers mutual funds that are ...


8

The 10% refers to the change in return, not the the change in principal. Case 1: you invest $1000 with a 0% TER and 10% return. That means your return is $100. Your balance would be $1100. Case 2: you invest $1000 with a 1% TER and 10% return, where the fee is subtracted immediately. After the fee you are left with $990, and your gross returns will be $99. ...


7

A 401(k) is tax-deferred. Rebalancing assets in a 401(k) is not a taxable event. In a taxable non-retirement account, you would figure out what investments have the best return after taxes. In a tax-advantaged account (like a 401(k), Roth 401(k), IRA, or Roth IRA) you simply figure out what investments have the best return. This is why some people advise ...


7

This article has a nice breakdown of the fees people usually face when investing in their 401(k). Not all plans charge all of these fees, but I'll try to summarize the ones they list that occur in general. expense ratios - this measures the fund's annual total operating expenses and includes some administrative fees, like 12b-1 fees, operating costs, etc. ...


7

The commenters who referred you to the prisoner's dilemma are exactly correct, but I wanted to give a more detailed explanation because I find game theory quite interesting. The Dilemma The prisoner's dilemma is a classic scenario in game theory where even though it's in the best interests of two or more players to cooperate, they fail to do so. Wikipedia ...


6

Expenses matter. At the back end, retirement, the most often quoted withdrawal rate is 4%. How would it feel to be paying 1/4 of each years' income to fees, separate from the taxes due, separate from whether the market is up or down? Kudos to you for learning this lesson so early. Your plan is great, and while I often say 'don't let the tax tail wag the ...


6

In many cases the expenses are not pulled out on a specific day, so this wouldn't work. On the other hand some funds do charge an annual or quarterly fee if your investment in the fund is larger than the minimum but lower than a "small balance" value. Many funds will reduce or eliminate this fee if you signup for electronic forms or other electronic ...


6

That expense ratio on the bank fund is criminally high. Use the Vanguard one, they have really low expenses.


5

It's reflected in the share price. For funds whose dividends are sufficient, as with SPY, the price reflects a fraction of the index, and the dividends are reduced slightly. For GLD the lack of a dividend means the costs are reflected in a price that lags the index (i.e. actual gold) by the expense ratio each year. What expense ratios are your funds ...


5

It seems at most a cosmetic difference - nothing keeps you from adding the 9$ cash to the fund the same day the fees are deducted from the shares.


5

The NAV of an ETF changes because of the share price of its components. It's actual price increases or decreases because buying or selling of ETF shares in the marketplace. If a stock is removed from the index that the ETF tracks, the portfolio composition changes. The ETF rebalances and realigns the weightings of its assets. While this may incur ...


5

Answer from Phillip is correct. I want to add that there are total 807 million shares outstanding fr EEM and turn over is 16% or Average Volume is 66 millions shares per day. So each EEM is changing hand every 12 days on an average. And same is not true for VWO . For VWO it is 1.51B/14.15M ~=100+ days.


4

See my comment for some discussion of why one might choose an identical fund over an ETF. As to why someone would choose the higher cost fund in this instance ... The Admiral Shares version of the fund (VFIAX) has the same expense ratio as the ETF but has a minimum investment of $10K. Some investors may want to eventually own the Admiral Shares fund but ...


4

The expense ratio is 0.17% so doesnt that mean that for every 10K I keep in the money market fund I lose $17/year? Not really. The expense ratio is taken before distributions are paid which applies to all mutual funds. Should I care about this? In this case not really. If it was a taxable account, then other options may be more tax-efficient that is ...


4

Returns reported by mutual funds to shareholders, google, etc. are computed after all the funds' costs, including The expense ratio The 12b-1 fee, if any The transactions costs of the fund, which are not publicly disclosed but which you do have to pay Therefore the returns you see on google finance are the returns you would actually have gotten.


4

Simply put, that's not allowed. Outside a retirement fund, they simply do not provide a mechanism to pay that expense ratio separately. Ergo, any effort to pay that expense ratio would be classified as a new/additional purchase of the fund. You now must deal with any fund rules about activity or minimum purchase size creating a separate purchase with ...


4

On a $100 investment, a 10% return is $10. A 1% fee is $100 * .01 = $1 $1 of the $10 is 10% There are times we talk about a 4% safe withdrawal rate in retirement. And people ask about paying a pro 1% to manage their money. To me, this means 3% for you, 1% for the planner. Or 25% of your withdrawals go to the planner you hired.


3

Where are you planning on buying this ETF? I'm guessing it's directly through Vanguard? If so, that's likely your first reason - the majority of brokerage accounts charge a commission per trade for ETFs (and equities) but not for mutual funds. Another reason is that people who work in the financial industry (brokerages, mutual fund companies, etc) have ...


3

The expense ratio reduces the return of the ETF; your scenario of paying 100.0015 is that of a load. Most (all?) ETFs can be bought without paying a load (sales charge as a percent of amount invested), and some ETFs can be bought without paying a brokerage fee (fixed or variable charge for a buy transaction just like buying any other stock through the ...


3

Both the expense ratio of the mutual funds and the administrative fees charged by your 401k plan administrator are a drain on your investment. However, the expense ratio is not visible in the transactions reported by the 401k administrator (or for that matter on the mutual fund's site either (for non-401k sites)). The share price of a mutual fund is net of ...


3

As Greg points out, rebalancing assets within a 401(k) (similarly, an IRA or a 403(b)) account is not a taxable event. If you are continuing to contribute to a tax-deferred account, one way of achieving re-balancing (or changing from a 70%-30% split to a 65%-35% split between stocks and bonds, say) is to change where your new contributions are going, ...


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