Author Topic: Expense Ratios  (Read 3913 times)

Vic99

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Expense Ratios
« on: June 21, 2016, 10:23:31 AM »
Obviously the lower the better. 

1) That said, what rate with Vanguard should I aim for?  I don't have an IRA but want to open one this summer.  VTSAX is 0.05%.  That fund is a contender for me.

2) Can you recommend a Vanguard fund that is heavier in renewable energy, recycling, and such?

I'm looking at making an intial investment in IRAs this year with 3-5k total.  My wife may do the same.  I have already maxed out my 403b and my wife is close to that as well.  We'd like to retire in 9-10 years.  I'm 46, wife is 41.

Thanks.

dandarc

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Re: Expense Ratios
« Reply #1 on: June 21, 2016, 10:34:43 AM »
With 3-5K, you can't buy VTSAX - minimum is $10K for admiral shares.  You can buy VTSMX (same fund - Investor Class Shares), minimum $3K, 0.16% ER.  Once your account balance reaches $10K, you can convert to the Admiral shares. 

You can also buy Vanguard ETFs commission-free at Vanguard.  While you get the Admiral-Share expense ratio, there are a couple of other costs to be aware of with ETFs.  The Bid-Ask Spread and any Premium or Discount to Net-Asset-Value when you purchase (or sell).

Personally, I'd dump into VTSMX, then in a year or 2 convert to VTSAX, if you're focusing on Stocks with these accounts.

forummm

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Re: Expense Ratios
« Reply #2 on: June 21, 2016, 11:50:43 AM »
^^^ Ditto

markbike528CBX

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Re: Expense Ratios
« Reply #3 on: June 21, 2016, 01:47:34 PM »
ditto again...

Until you have ~50K in VTSMX or similar, i wouldn't bother trying to tilt, skew or favor sectors or other subsets of the pie.

You already have in VTSMX the whole pie (largely...).

Vic99

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Re: Expense Ratios
« Reply #4 on: June 21, 2016, 02:29:12 PM »
Thanks.  Ok, VTSMX.  0.16% is a reasonable or excellent rate?

Any info on renewable fund by Vanguard?

dandarc

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Re: Expense Ratios
« Reply #5 on: June 21, 2016, 02:36:48 PM »
.16% is pretty cheap.  Not the cheapest you could get anywhere for anything, but pretty cheap for a total stock market fund.

Why renewable energy?  I don't think Vanguard has this offering, but I'm wondering why you want to invest in that sector.

forummm

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Re: Expense Ratios
« Reply #6 on: June 21, 2016, 02:45:09 PM »
If you want to invest in solar energy you could buy some individual firms or buy an ETF like TAN. But I really wouldn't do that as an investment. Even though renewable energy is the future, the sector is highly volatile and will be pretty commodity-driven. And there are a lot of loser firms in TAN that will weigh down any good performance that the others might provide.

Vic99

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Re: Expense Ratios
« Reply #7 on: June 21, 2016, 07:42:37 PM »

Why renewable energy?  I don't think Vanguard has this offering, but I'm wondering why you want to invest in that sector.

I want to invest part of my IRAs in renewable energy if possible because I believe in it.  Since you asked, I bought solar panels for my house, drive a plug in electric hybrid (chevy volt), and try to be sustainable.  I want to support, at least to some degree, causes that I believe in.  Just like I'd rather not invest in cigarette companies.

I realize there is a chance some of these funds invest in a wide variety of products and ideas that I both believe in and don't, but rather than try to single out one fund or product over another for every single investment, I'd like to skew my investments more in one direction.  That is probably more pragmatic than trying to be a purist . . . . besides I have two kids and don't have time to nit pick . . . but it would be nice to get closer to my ideals.


Radagast

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Re: Expense Ratios
« Reply #8 on: June 21, 2016, 08:14:27 PM »

Why renewable energy?  I don't think Vanguard has this offering, but I'm wondering why you want to invest in that sector.

I want to invest part of my IRAs in renewable energy if possible because I believe in it.  Since you asked, I bought solar panels for my house, drive a plug in electric hybrid (chevy volt), and try to be sustainable.  I want to support, at least to some degree, causes that I believe in.  Just like I'd rather not invest in cigarette companies.

I realize there is a chance some of these funds invest in a wide variety of products and ideas that I both believe in and don't, but rather than try to single out one fund or product over another for every single investment, I'd like to skew my investments more in one direction.  That is probably more pragmatic than trying to be a purist . . . . besides I have two kids and don't have time to nit pick . . . but it would be nice to get closer to my ideals.
Just two days ago I was reading a book on investing by my favorite author (Bill Bernstein) which explicitly called out tobacco companies as having unusually high returns and renewable energy companies as having unusually poor returns precisely because of investors who can't separate their investments from their ideologies. Also, I have done a little bit of investigating into this area myself (well like five minutes) and thought all the "socially conscious" funds I found had the primary aim of the investment industry making more money for itself at the expense of individual investors. Therefore, I recommend that you invest your money as efficiently as possible regardless of ideology, and use your time, consumerist habits, and subsequent (slightly larger) fortune to try and mold the world in your image.

MustacheAndaHalf

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Re: Expense Ratios
« Reply #9 on: June 21, 2016, 10:17:51 PM »
Weigh the expense ratio by doing the multiplication:
$5000 x 0.0005 = $2.50 / year
$5000 x 0.0016 = $8 / year

I disagree with an earlier post and several "ditto" comments: both bid-ask spread and NAV/market price issues can be ignored for Vanguard Total Stock Market ETF ("VTI") specifically.  Not all Vanguard funds, but for "VTI" neither is a factor.

A market order for VTI will have the smallest bid-ask spread possible, because it's very heavily traded.  There's $61 billion dollars worth of VTI to trade, making it the third largest ETF.  The bid-ask will be $0.01 apart on ETF shares that trade for $106.70.  The bid ask spread will be less than 1/10,000th of your purchase.  Meanwhile, if you instead buy mutual fund shares, you'll get the closing price for that day, hours later.  Most of the time the market goes up, so most often you will lose more money waiting until the market close than if you pay the $0.01 bid-ask spread and purchase VTI.

Second issue was the NAV vs price.  According to Vanguard's website, the NAV and market price returns are exactly the same for the last 10 years, and since 2001.  For "VTI" specifically, there isn't a problem with NAV vs market price.
https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0970#tab=1

So for "VTI", Vanguard Total Stock Market ETF, both bid-ask spread and NAV/market price are not significant.


Another advantage of ETFs is the typical mutual fund minimum of $3,000 doesn't apply to ETF shares.  If you look at Vanguard Total Stock Market Investor Shares, you can't even purchase the fund with less than $3,000 in starting money.  With ETFs, with $1000 you can buy 9 shares of "VTI".  You also get the savings from a lower expense ratio ($2.50/year vs $8/year) but that savings is admittedly small and temporary if you plan to have $10,000 in a couple years.
« Last Edit: June 21, 2016, 10:20:11 PM by MustacheAndaHalf »

MichaelB

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Re: Expense Ratios
« Reply #10 on: June 23, 2016, 02:24:37 PM »
I wouldn't fret about the expense ratios as long as you stay with Vanguard. I used to work for Vanguard, and then got a job elsewhere in the industry where I dealt with primarily loaded funds...and damn. Even the highest Vanguard expense ratios (about 0.4% or 0.5%) are solidly half, or less, of most other actively managed, advisor sold funds in the industry.

Vagabond76

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Re: Expense Ratios
« Reply #11 on: June 23, 2016, 08:40:47 PM »

Why renewable energy?  I don't think Vanguard has this offering, but I'm wondering why you want to invest in that sector.

I want to invest part of my IRAs in renewable energy if possible because I believe in it.  Since you asked, I bought solar panels for my house, drive a plug in electric hybrid (chevy volt), and try to be sustainable.  I want to support, at least to some degree, causes that I believe in.  Just like I'd rather not invest in cigarette companies.

I realize there is a chance some of these funds invest in a wide variety of products and ideas that I both believe in and don't, but rather than try to single out one fund or product over another for every single investment, I'd like to skew my investments more in one direction.  That is probably more pragmatic than trying to be a purist . . . . besides I have two kids and don't have time to nit pick . . . but it would be nice to get closer to my ideals.
Just two days ago I was reading a book on investing by my favorite author (Bill Bernstein) which explicitly called out tobacco companies as having unusually high returns and renewable energy companies as having unusually poor returns precisely because of investors who can't separate their investments from their ideologies. Also, I have done a little bit of investigating into this area myself (well like five minutes) and thought all the "socially conscious" funds I found had the primary aim of the investment industry making more money for itself at the expense of individual investors. Therefore, I recommend that you invest your money as efficiently as possible regardless of ideology, and use your time, consumerist habits, and subsequent (slightly larger) fortune to try and mold the world in your image.

I've made an imperial fukton of money off tobacco companies. High dividends + big growth = lots of $$$. Smoke if you got 'em.

dandarc

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Re: Expense Ratios
« Reply #12 on: June 24, 2016, 07:49:22 AM »
Is an imperial fukton more or less than a metric fukton?

Spork

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Re: Expense Ratios
« Reply #13 on: June 24, 2016, 08:39:13 AM »

Why renewable energy?  I don't think Vanguard has this offering, but I'm wondering why you want to invest in that sector.

I want to invest part of my IRAs in renewable energy if possible because I believe in it.  Since you asked, I bought solar panels for my house, drive a plug in electric hybrid (chevy volt), and try to be sustainable.  I want to support, at least to some degree, causes that I believe in.  Just like I'd rather not invest in cigarette companies.

I realize there is a chance some of these funds invest in a wide variety of products and ideas that I both believe in and don't, but rather than try to single out one fund or product over another for every single investment, I'd like to skew my investments more in one direction.  That is probably more pragmatic than trying to be a purist . . . . besides I have two kids and don't have time to nit pick . . . but it would be nice to get closer to my ideals.
Just two days ago I was reading a book on investing by my favorite author (Bill Bernstein) which explicitly called out tobacco companies as having unusually high returns and renewable energy companies as having unusually poor returns precisely because of investors who can't separate their investments from their ideologies. Also, I have done a little bit of investigating into this area myself (well like five minutes) and thought all the "socially conscious" funds I found had the primary aim of the investment industry making more money for itself at the expense of individual investors. Therefore, I recommend that you invest your money as efficiently as possible regardless of ideology, and use your time, consumerist habits, and subsequent (slightly larger) fortune to try and mold the world in your image.

I've made an imperial fukton of money off tobacco companies. High dividends + big growth = lots of $$$. Smoke if you got 'em.

Yeah, they've treated us well, too.  Add in "lots of spin off stock that also did well".

Many years ago, I also wanted to buy things that I agreed with.  I worked in IT as a "unix guy".  I bought lots of companies I believed in and was very lucky when I broke even.  Wifey was a heartless, numbers-minded investor.  She took control of stock picks and pretty much bought winners.  I decided sitting in an easy chair drinking beer while she picked stocks was a better role for me.

Vagabond76

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Re: Expense Ratios
« Reply #14 on: June 24, 2016, 01:18:26 PM »
Is an imperial fukton more or less than a metric fukton?

The metric system blows. Besides, "imperial" seems fitting given the Brexit vote.