Author Topic: Gross expense ratio?  (Read 1824 times)

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 7857
  • Location: United States
Gross expense ratio?
« on: May 26, 2017, 09:12:42 AM »
I'm sorry this is such a stupid question... I understand  gross/net income- but I've never seen expense ratios as gross/net. (Or I've never paid attention...)

I got new plan documents from TIAA and it lists the gross expense ratio and the net expense ratio.

For many funds, these are the same. For instead, the Vanguard 500 Index (VFIAX)- the gross and net are both 0.05%.
But then for one of their managed funds they are different (the most egregious being PLKTX- the gross is 134.89% and the net is 0.53%)

Apparently my old funds are no longer allowed in the account so I have to rebalance.
I am thinking I will just balance between VFIAX and VBTLX and balance it myself rather than going with a lifecycle fund anymore.  I know more than I used to.

There is an international bond offer (VBTLX) but no international stock...  However, I hold that in my taxable accounts, and my understanding is it is better to keep international in taxable accounts.

I really hate investing. I wish there was a better way to make your money grow with minimal effort.  Although maybe if I put in more effort it wouldn't be so darn confusing!

Mighty-Dollar

  • Bristles
  • ***
  • Posts: 377
Re: Gross expense ratio?
« Reply #1 on: May 27, 2017, 02:49:09 AM »
Invest in index funds -- not actively managed mutual funds. Numerous studies year after year show that index investing is the way to go. Paying 0.53% instead of .05% adds up year after year.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1664
Re: Gross expense ratio?
« Reply #2 on: May 27, 2017, 03:13:56 AM »
I am thinking I will just balance between VFIAX and VBTLX and balance it myself rather than going with a lifecycle fund anymore.
Sounds reasonable.  The amount of bonds depends on your age, but using the same allocation as a lifecycle fund - but doing it yourself - borrows advice from a known expert.

You might want to ask why your retirement plan does not offer international stocks - that's very strange.  It's an important diversification, and preventing you from having it doesn't seem in your best interest.

I'm a red panda

  • Walrus Stache
  • *******
  • Posts: 7857
  • Location: United States
Re: Gross expense ratio?
« Reply #3 on: May 27, 2017, 06:08:44 AM »


You might want to ask why your retirement plan does not offer international stocks - that's very strange.  It's an important diversification, and preventing you from having it doesn't seem in your best interest.

It looks like there are some international stocks in the managed funds. Just not an index available.

It wasn't in the document sent to me, because that was just about new offerings and what was being replaced.


So, any explanation of gross expense ratio? Google said something about without waivers. But where Do waivers come from?

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1664
Re: Gross expense ratio?
« Reply #4 on: May 28, 2017, 07:37:41 PM »
Waivers are especially common on new funds, where the expenses are a much higher percentage of assets early on.  Those running the fund use waivers to build up the fund with a lower expense ratio, based on the assumption that with enough assets they can start charging something reasonable without a waiver.

Some funds also use it for advertising.  When Fidelity lowered their expense ratio on some fund (forget which), they were actually using a waiver to do so.  The fund's costs were higher than the expenses being charged, but they wanted to compete with Vanguard by pretending they had lower costs.  The money has to come from somewhere - so someone else is paying for it.  You can look on morningstar.com for a fund, and the "expenses" or "fees" page usually has the details.