Author Topic: Difference in Index Funds?  (Read 1374 times)

LurkingMustache

  • 5 O'Clock Shadow
  • *
  • Posts: 78
Difference in Index Funds?
« on: September 20, 2016, 06:32:54 PM »
Hey there!

New to the site and needed some help.  I was investigating my targeted retirement fund in my 401k and realized it had a .17 ER.  There is an option in Fidelity to use a "brokerage link" account where you can select your own funds.  I was planning to switch funds to this and buy fidelitys total us market index.

I also realized that inside my 401k options there is another total us stock market index fund with a .01% er that I can invest in, but when I go to more details it says that it is managed by "blackrock index funds".  My question is, should I care about who manages the index fund?  The ER seems insanely low, at least less than Vanguard and Fidelities, and it's easier to invest in inside my 401k.  But I don't know anything about "blackrock" or how they select their stocks.  It also said 2% of the fund was made up as "cash / short term" holdings which seemed odd.

Would it be worth the hassle of transferring funds to the brokerage link account and investing in the .045% er fidelity total market index fund because it is familiar / well known?  Thanks!

seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5285
  • Age: 35
  • Location: Seattle, WA
    • My blog
Re: Difference in Index Funds?
« Reply #1 on: September 20, 2016, 08:22:37 PM »
BlackRock is a pretty big, reputable company. I would have no hesitation to put my money into one of their index funds if that was what my plan offered.

MustacheAndaHalf

  • Magnum Stache
  • ******
  • Posts: 2716
Re: Difference in Index Funds?
« Reply #2 on: September 21, 2016, 09:21:10 AM »
If you contribute $16,000 this year to the Target Retirement fund, that's $27.50/year in fund expenses.  It's within reason for a target date fund.  I'm a little surprised at the extremely low 0.01% expense ratio ($1.60/year per $16,000) outside of a massive government managed fund.  Blackrock manages "iShares" funds, which have good expense ratios and plenty of index funds, so they seem trustworthy to me.

DrF

  • Bristles
  • ***
  • Posts: 464
Re: Difference in Index Funds?
« Reply #3 on: September 21, 2016, 09:30:26 AM »
Blackrock seems as secure as any other financial services company. I reiterate what was said above, they are huge and you should have no issues. Congratulations on the 0.01% expense ratio!

LurkingMustache

  • 5 O'Clock Shadow
  • *
  • Posts: 78
Re: Difference in Index Funds?
« Reply #4 on: September 21, 2016, 09:55:44 AM »
Thanks!  I was surprised at the ER as well, I just didn't want to go with something that isn't as well known since I know most folks really focus on Vanguard.  But I'll go with this option since it's less manual than going with the set managed option and a lower ER than fidelitys current index fund option.

The target date fund isn't too high, but I have about a 40 year time span on retirement and seems like it makes more sense to go with the index fund vs. paying a higher ER for a managed fund.

triangle

  • Stubble
  • **
  • Posts: 149
  • Location: North Carolina, USA
Re: Difference in Index Funds?
« Reply #5 on: September 21, 2016, 09:48:41 PM »
Blackrock might be the largest asset manager around, so there should be a lot of stability behind the fund. I am also surprised by the super low fee, maybe that is something your company helped negotiate or comes with some other restrictions. But a total US index should also be the lowest fund offering possible since there will hardly ever be a reason for it to sell stock shares unless there are lots of simultaneous redemptions from people getting nervous about the stock market and exiting. As there are no arbitrary boundaries like mid-cap, small-cap, value, etc to consider and generate internal trades. On a typical trading day maybe just a nominal about of buying as people put more money to work.