Author Topic: Roth IRA ETF Fees  (Read 1751 times)

Bones

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Roth IRA ETF Fees
« on: June 14, 2017, 11:02:12 AM »
Hello, I have a question. I am 26 years old and from a very young age my dad set me up a Roth IRA that my babysitting money would go into (plus lawn mowing and other jobs in high-school, etc.).

I have about $17,000, I haven't been contributing to it for the last couple years (forgot it existed) but recently started putting in $50 per month (which is all I can afford right now, should change soon).

Anyway, I set-up the online account access (it is through Schwab) and I'm in a bit of a unique situation. My dad has a financial planner and she thinks it is cool that we got interested in finances at a young age and so is managing me and my siblings accounts for free (my dad pays for his assets under management).

I talked to her on the phone yesterday and said I was interested in switching over some of my holdings to Vanguard VTI (I only hold ETFs in my Roth). She said that she wouldn't say yes but wouldn't say no and that it was my money and my call.

I ended up switching over half of my holdings to VTI today (sold my highest fee holdings which were anywhere from 0.33%-0.5% expense ratios - including silver and gold ETFs that I purchased a number of years ago that I lost money on and decided to get rid of due to the "sunk cost fallacy"). I am happy with that call (just paid $5 per trade so $25 total - selling 4 and buying 1).

I have two more non-vanguard holdings in my Roth. I am absolutely not going to become an active trader I want to set my account up with the lowest fees possible especially since I will be investing in this fund for quite some time and will therefore see a noticeable difference down the line (I played around with Personal Capital's fee calculator last night).

My question is this:
The other 50% of my holdings are in IWB (iShares Russell 1000 ETF) and XLU (Utilities Select Sector). These both state they have an expense ratio of 0.14% (verses 0.04% for VTI). Is it worth switching these over to VTI as well? I feel like it is more simple to have one very low fee fund that tracks the entire stock market. Any opinions? I am young and don't know too much about this so please let me know if I am on track or not.
« Last Edit: June 14, 2017, 11:04:06 AM by Bones »

runewell

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Re: Roth IRA ETF Fees
« Reply #1 on: June 14, 2017, 11:28:21 AM »
Those expense fees aren't terrible, in which case I think it's more a question of investments.  If you really wanted Russell and Utilities exposure, I'd leave it alone.

Bones

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Re: Roth IRA ETF Fees
« Reply #2 on: June 15, 2017, 07:42:08 AM »
Thank you for your response runewell! I should have clarified and expanded my question again. I don't know if I really want/need the exposure to both Russell and Utilities (I didn't pick them, that financial advisor did quite some time ago). Most things I've read is just to throw everything into VTSAX/VTI and that should do better then trying to hedge certain sectors. So  I guess my question is does it make sense to keep those from an investment standpoint verses just a fee standpoint, I understand that 0.14% is very low.

I'll think it about it for a while but if anybody has any input, I would be happy to hear it.

Frankies Girl

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Re: Roth IRA ETF Fees
« Reply #3 on: June 15, 2017, 07:55:33 AM »
It is pretty low, but again, if you don't know why you are holding a certain fund and don't think you'd purchase it all over again, then it being cheap isn't the best reason to continue holding it. If you do a crash course (below) you'd probably understand pretty much all you need to know within a week or two.

I'd suggest you read Jim Collins' book/website to get an understanding of how the market works (along with general investing/money knowledge). http://jlcollinsnh.com/stock-series/

You're mid 20s, but this stuff Jim wrote still applies for the most part: http://jlcollinsnh.com/2011/06/08/how-i-failed-my-daughter-and-a-simple-path-to-wealth/


But also, figure out what your goals/plans are for your future and write out an IPS (investment policy statement) to use as a guide.
https://www.bogleheads.org/wiki/Investment_policy_statement

Then using your IPS, you figure out your asset allocation. https://www.bogleheads.org/wiki/Asset_allocation

Further reading: https://www.bogleheads.org/wiki/Main_Page

If you're under 35,and you understand the difference between risk and market volatility (which you should after reading Collins' book and some of the basic Bogleheads stuff) you really can't go wrong with being 100% VTSAX.

Bones

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Re: Roth IRA ETF Fees
« Reply #4 on: June 15, 2017, 07:58:05 AM »
Thank you very much Frankies Girl, that's a great response. I read the first third of JL Collins stock series the other day and will now go back and read the rest. I saw that ChooseFI podcast has an episode about it as well which I downloaded last night so I will listen to that today as well. Thanks for your input!

Bryan

Car Jack

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Re: Roth IRA ETF Fees
« Reply #5 on: June 15, 2017, 08:18:35 AM »
For what you're doing, in my opinion, you're no better off at Vanguard than at Schwab or TDAmeritrade.  At Schwab, you can buy ETFs for no fee and the expenses are lower than anywhere else (including Vanguard).  Your best bet is to search through the ETF list at Schwab and put them in order of ER.  You can move from US equity (I use SCHB, which is near identical to Vanguard's VTI), US bond, International equity and then just buy what you're looking for. 

I have accounts everywhere.  For Vanguard, I have everything in one fund and I do nothing with it.  With all the influx, it's often impossible to even talk with them and I don't want them screwing things up.  My Vanguard ETFs are at TDAmeritrade since I trust their web interface and can get phone and online chat responses 24/7.  I've got more at Schwab for taxable and use ETFs there for their lowest costs and high volume (low spread) in house ETFs.

Bones

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Re: Roth IRA ETF Fees
« Reply #6 on: June 15, 2017, 04:04:35 PM »
Car Jack - I think you may have misunderstood. I'm not planning on leaving Schwab. I purchased VTI within my Schwab Roth IRA.

L.A.S. - thank you for your input, something to think about. I know that i am not willing to pay fees but I  keep keep that in mind.