I am helping a close friend get started in investing. She recently came up with $4000 (mostly income tax refund money), so I helped her open a Roth IRA at Vanguard. With such a low dollar amount, I suggested the LifeStrategy Moderate Growth Fund, VSMGX, to get a some diversity. It holds investor class shares of the Total Stock Market, Total Bond Market, Total Intl Stock and Total Intl Bond funds.
The advertised ER is 0.14%. I assume that the ER is just a weighted average of the underlying funds, with perhaps a little extra going to Vanguard's pocket...I'm not really sure. All my securities are single class funds (VYM, VWALX in a taxable account, VBTLX in Roth accounts) and individual stocks. I have no experience with funds of funds.
Also, as she learns to buy less shit and instead add money to her account, I would recommend she move away from VSMGX and into single class funds. For example, when she gets her balance to $13K, she trade her VSMGX for $10K of VTSAX and $3K VBTLX. The weighted average of this portfolio would be .08%.
Any thoughts on any of this?