HSA mutual funds question: Do all of my options stink? (see attached)

[bleumanchu]

Hello fellow Mustachians. I have an HSA through my employer. I’ve only had the HSA since January, and I haven’t actually reached a contribution level where I can yet start investing the excess, however I’ve been reviewing my options and don’t think they’re very good.  I will attach the options below. I don’t have the option of making pre-tax contributions to another HSA at the moment, unfortunately. I’m hoping one of you (or several of you) can make some recommendations on which fund or funds might be a reasonable choice given the options.

I’ll admit I’m still a newbie investor, so maybe there’s something here that isn’t a terrible option. I did contact our benefits folks to see if they can explore adding some lower ER index funds, and they said they would forward my request to the “executive committee”, so maybe there’s hope.

(edited to answer relevant and important questions from below--ongoing editing likely to occur):

- I do not anticipate any large medical expenses for quite some time that I will not be able to cover out of pocket.  I am fortunate to have a solid enough income to deal with most bumps in the road for the next few decades, though catastrophe can strike whenever it wants to. My intent is to utilize this as a tax sheltered retirement account, contributing up to the maximum allowable for the forseeable future.

[Dezrah]

A few questions first:

1) Do you anticipate any large predictable medical expenses in the near future (<5 years)?  Examples include a pregnancy, major dental work, knee surgery, vasectomy, etc.
2) If so are you comfortable paying up to your maximum out-of-pocket for 2 years straight?  This assumes the bills for the procedure bleed into two calendar years.
3) Are your intentions to use this as an additional tax sheltered retirement account or will you cash out your investments as soon as your bills exceed whatever is in your HSA checking account?

The triple-tax advantage of the HSA investment is fantastic, but only if you feel confident in your health and your ability to pay for a high deductible out-of-pocket.  If you are confident, then I say to look for whatever has a good combination of low fees and solid long term performance.  Others may have better specific advice about the individual funds.

[G-dog]

I just finally found out how to invest my HSA yesterday! Mine is also new, as of January 2014. I need to keep $1K in the account and can invest the rest.
(FYI - seems they tried to make this as obtuse, confusing, and difficult as possible regarding setting this up).

I think investing, even with high ER is better than not investing at all - so take the lowest ER and go for it.

But those do look like some pretty high ERs!

Just my thoughts.

[bleumanchu]

Dezrah, G-dog, thanks for the responses.  I agree, I should take what I can get.  Hopefully better options will be available in the near future.


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[dividendman]

I would junk it all in the Drefus Small Cap Stock Index Fund, but it is a ripoff:

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1408904856985&chddm=1452956&cmpto=INDEXSP:.INX;NYSEARCA:VTI;NYSEARCA:IJR&cmptdms=0;0;0&q=MUTF:DISSX&&ei=lC76U4jlFciUiQK87oGIBw

Note how the IJR (the ishares version of the same index) has gotten way better returns than DISSX and it's expense ratio is 0.14% compared to DISSX at 0.51%. Expenses matter.... but this is the lowest one in your options so I'd bite the bullet. I also put VTI and the S&P 500 in the chart just for comparison.... though it's not a real compare since they're different indices.

[bleumanchu]

I would junk it all in the Drefus Small Cap Stock Index Fund, but it is a ripoff:

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1408904856985&chddm=1452956&cmpto=INDEXSP:.INX;NYSEARCA:VTI;NYSEARCA:IJR&cmptdms=0;0;0&q=MUTF:DISSX&&ei=lC76U4jlFciUiQK87oGIBw

Note how the IJR (the ishares version of the same index) has gotten way better returns than DISSX and it's expense ratio is 0.14% compared to DISSX at 0.51%. Expenses matter.... but this is the lowest one in your options so I'd bite the bullet. I also put VTI and the S&P 500 in the chart just for comparison.... though it's not a real compare since they're different indices.

dividendman, I was thinking that was likely my best option, but wanted to run it by others who are more experience/well informed than I am.  Thanks also for the info on the IJR, as well as the other indices. If nothing else, I may forward your graph on to my benefits folks just to add a little more ammunition for the very logical argument to offer other funds.   

[kite]

Those are high, but ER is only part of the expense picture in an HSA.  The very famous HSA provider with mutual fund options from the well known LowFee folks has a $75 annual administrative fee just for holding the account,  then there are various other fees for withdrawals, using the debit card, etc.  You have to really plan how you'll use it to minimize fees. 
The other thing to note - unless your employer is funding the HSA, you can pick any HSA that you want.

[dividendman]

You know what? I found an error in the chart I linked up there. Some of the funds didn't exist at the started period of the timeline. Here is a correct chart for comparison purposes (conclusions are still the same though):

https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1408921524347&chddm=1302611&cmpto=INDEXSP:.INX;NYSEARCA:VTI;NYSEARCA:IJR&cmptdms=0;0;0&q=MUTF:DISSX&&ei=VW_6U9nTIO_SigL7w4HACw

Note that you might want to strip out VTI and S&P 500 if you just want to show work how you're getting ripped off. Right now they might look at the chart and say "see, if we gave you more options like VTI or and S&P 500 index fund you would have done worse than DISSX". Which is obviously BS since they are different indices, but you don't need to conflate the point with them.

[bleumanchu]

Kite, dividendman, good points.

kite--unfortunately, it is employer sponsored/funded, and I was told quite pointedly that I am not able to contribute pretax dollars to any other HSA.

In general though, I definitely do need to look more and check what other fees, etc. there are with my HSA.