Author Topic: Expense ratios, how high is too high  (Read 12371 times)

dsmexpat

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Expense ratios, how high is too high
« on: April 07, 2015, 08:39:58 AM »
I am not the investor in this particular fund, it is a friend of mine and their broker is a family friend of theirs. Due to my sudden interest in all things investing I wanted to look into what the professional was doing on their behalf as I have never had a broker managing my investments. They were kind enough to look through their statements which they'd been pretty much just throwing money at and ignoring, trusting the judgement of the family friend broker.

Anyway, the broker put 100% of their money in GFACX which has an expense ratio of 1.45%. VIGAX seemed somewhat comparable to this with a expense ratio of 0.09%. How many free dinners, birthday cards, general perks and related effort should she be getting for this? Is she getting totally used or is this about average exploitation of the ignorant investors by the banks? Is the broker being a good friend or a good employee? Or both, is this probably about as low an expense ratio as they offer for that kind of product, I guess it's possible he charged the least he could while still helping her if every fund they offer has crazy high expenses.

Please advise, I've shared this forum with the friend in question and will link them the topic.
« Last Edit: April 07, 2015, 08:55:34 AM by dsmexpat »

forummm

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Re: Expense ratios, how high is too high
« Reply #1 on: April 07, 2015, 08:51:01 AM »
1.45% is too high. This fund lags the S&P 500. The advisor should be fired and they should put all their stock investments into VFIAX, VTSAX, or a similar offering. You don't need to pay more than 0.05% for this kind of investment. If they really want a growth fund for some reason (which I don't advise), then you can go with VIGAX and the 0.09% expense ratio. For 1.45% vs 0.05%, you are giving away over $6 million dollars to fees over 50 years on a $100k investment, assuming a 6% real return.

https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost

I don't know if the advisor is just incompetent or is getting a kickback for this allocation. Either way, fire them.

Dodge

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Re: Expense ratios, how high is too high
« Reply #2 on: April 07, 2015, 08:57:35 AM »
I am not the investor in this particular fund, it is a friend of mine and their broker is a family friend of theirs. Due to my sudden interest in all things investing I wanted to look into what the professional was doing on their behalf as I have never had a broker managing my investments. They were kind enough to look through their statements which they'd been pretty much just throwing money at and ignoring, trusting the judgement of the family friend broker.

Anyway, the broker put 100% of their money in GFACX which has an expense ratio of 1.45%. VIGAX seemed somewhat comparable to this with a expense ratio of 0.09%. How many free dinners, birthday cards, general perks and related effort should she be getting for this? Is she getting totally used or is this about average exploitation of the ignorant investors by the banks? Is the broker being a good friend or a good employee? Or both, is this probably about as low an expense ratio as they offer for that kind of product, I guess it's possible he charged the least he could while still helping her.

Please advise, I've shared this forum with the friend in question and will link them the topic.

So they put her in a single fund, that's 100% stocks, with a 1% load, and an expense ratio (yearly fee) of 1.45%?

Ouch.

Yes this is probably about the average exploitation.  Yes she is getting used.  The broker is likely ignorant as well, thinking they are helping your friend, but it doesn't matter.  If she wants to be 100% stocks, show her the difference between this fund, and VTSAX:



http://www.begintoinvest.com/expense-ratio-calculator/

If she's just in a single fund, the broker literally isn't doing any "management" for her.  She wouldn't notice a difference between this broker, and VTSAX at Vanguard...well maybe she'd notice more money in her pocket. :)

dsmexpat

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Re: Expense ratios, how high is too high
« Reply #3 on: April 07, 2015, 09:05:03 AM »
1.45% is too high. This fund lags the S&P 500. The advisor should be fired and they should put all their stock investments into VFIAX, VTSAX, or a similar offering. You don't need to pay more than 0.05% for this kind of investment. If they really want a growth fund for some reason (which I don't advise), then you can go with VIGAX and the 0.09% expense ratio. For 1.45% vs 0.05%, you are giving away over $6 million dollars to fees over 50 years on a $100k investment, assuming a 6% real return.

https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost

I don't know if the advisor is just incompetent or is getting a kickback for this allocation. Either way, fire them.
That vanguard tool is a thing of beauty. I was going to generate her an excel spreadsheet that could work it out for her but it already exists and shows it graphically and it's everything I ever hoped it would be. Maybe I need to stop thinking about spreadsheets so much.

Edit: I made the spreadsheet anyway. <3 spreadsheets
« Last Edit: April 07, 2015, 12:12:34 PM by dsmexpat »

tj

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Re: Expense ratios, how high is too high
« Reply #4 on: April 07, 2015, 10:09:30 AM »
Anything over 60 bps is probably unnecessary. Even that is quite high.
« Last Edit: April 07, 2015, 03:23:48 PM by tj »

LordSquidworth

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Re: Expense ratios, how high is too high
« Reply #5 on: April 07, 2015, 12:02:36 PM »
I am not the investor in this particular fund, it is a friend of mine and their broker is a family friend of theirs. Due to my sudden interest in all things investing I wanted to look into what the professional was doing on their behalf as I have never had a broker managing my investments. They were kind enough to look through their statements which they'd been pretty much just throwing money at and ignoring, trusting the judgement of the family friend broker.

Anyway, the broker put 100% of their money in GFACX which has an expense ratio of 1.45%. VIGAX seemed somewhat comparable to this with a expense ratio of 0.09%. How many free dinners, birthday cards, general perks and related effort should she be getting for this? Is she getting totally used or is this about average exploitation of the ignorant investors by the banks? Is the broker being a good friend or a good employee? Or both, is this probably about as low an expense ratio as they offer for that kind of product, I guess it's possible he charged the least he could while still helping her if every fund they offer has crazy high expenses.

Please advise, I've shared this forum with the friend in question and will link them the topic.

The broker has her in one fund. The broker has her in a single growth fund. The broker has her in an expensive fund, seriously lagging the S&P 500. The broker is bringing zero added value for the cost. The broker is costing her more money with a bad fund.

The broker is looking out for their own interests. They're encouraged to exploit being "friends" with people.

Doulos

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Re: Expense ratios, how high is too high
« Reply #6 on: April 07, 2015, 02:21:56 PM »
Edit: I made the spreadsheet anyway. <3 spreadsheets

dsmexpat

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Re: Expense ratios, how high is too high
« Reply #7 on: April 08, 2015, 10:54:59 AM »
My spreadsheet simulating her starting amount and regular annual deposits estimated the losses of potential revenue to fees (both directly in paying the fee and indirectly through the lost growth on the fee) at a little under 25 cents on each dollar. Good news is she's scheduled a dinner to discuss his management which will most likely go on the company expense account which is the closest she'll get to recouping her losses so far. Bad news is her parents, who are embarrassingly rich, are pressuring her to stick with him because "he's always taken good care of them". I shudder to think of the implications of that.

691175002

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Re: Expense ratios, how high is too high
« Reply #8 on: April 08, 2015, 12:25:12 PM »
The current rate for full service is roughly 1% to the broker in the 250-1000k range.  Throw on a 45bps fee for active management and they are currently being charged the normal amount.

Just remember to consider the services a broker is providing.  Selling out at the bottom or high turnover speculating is a lot more expensive than an inflated MER.  A broker who cares and has gained the trust of his clients will in theory help avoid mistakes. 

Bogle-philosophy is a much better way to invest but make sure your friend understands it and is committed.  Encouraging undisciplined investors to manage their own portfolio is dangerous.


The fact that the entire account is in a single growth fund is concerning, and if this account is >30k I would be extremely skeptical of the brokers financial knowledge.  Is this a real investment adviser or just a mutual fund dealer/salesman?
« Last Edit: April 08, 2015, 12:29:28 PM by 691175002 »

Dodge

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Re: Expense ratios, how high is too high
« Reply #9 on: April 08, 2015, 12:42:50 PM »
The current rate for full service is roughly 1% to the broker in the 250-1000k range.  Throw on a 45bps fee for active management and they are currently being charged the normal amount.

Just remember to consider the services a broker is providing.  Selling out at the bottom or high turnover speculating is a lot more expensive than an inflated MER.  A broker who cares and has gained the trust of his clients will in theory help avoid mistakes. 

Bogle-philosophy is a much better way to invest but make sure your friend understands it and is committed.  Encouraging undisciplined investors to manage their own portfolio is dangerous.


The fact that the entire account is in a single growth fund is concerning, and if this account is >30k I would be extremely skeptical of the brokers financial knowledge.  Is this a real investment adviser or just a mutual fund dealer/salesman?

I know people who called their broker around the March 2009 low, and had them sell all their stocks.  I know other people who had their broker call THEM around the March 2009 low, and PUSHED them to sell all their stocks.

From what I've seen, individual investors are better off in a Vanguard LifeStrategy fund.  It keeps expenses low, they won't be put in any underperforming funds, and they'll have at least 20% bonds.
« Last Edit: April 08, 2015, 01:07:56 PM by Dodge »

dsmexpat

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Re: Expense ratios, how high is too high
« Reply #10 on: April 08, 2015, 12:58:05 PM »
The current rate for full service is roughly 1% to the broker in the 250-1000k range.  Throw on a 45bps fee for active management and they are currently being charged the normal amount.

Just remember to consider the services a broker is providing.  Selling out at the bottom or high turnover speculating is a lot more expensive than an inflated MER.  A broker who cares and has gained the trust of his clients will in theory help avoid mistakes. 

Bogle-philosophy is a much better way to invest but make sure your friend understands it and is committed.  Encouraging undisciplined investors to manage their own portfolio is dangerous.


The fact that the entire account is in a single growth fund is concerning, and if this account is >30k I would be extremely skeptical of the brokers financial knowledge.  Is this a real investment adviser or just a mutual fund dealer/salesman?
Value greater than 30k, financial adviser working for one of the five largest brokerages in the United States, a household name.
« Last Edit: April 08, 2015, 04:00:07 PM by dsmexpat »

LordSquidworth

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Re: Expense ratios, how high is too high
« Reply #11 on: April 08, 2015, 03:13:13 PM »
Value greater than 30k, financial advisor working for one of the largest brokerages in the United States, a household name.

If I put a clients whole account in that fund for the household name brokerage I've worked for, there'd be red flags raised and compliance would be calling.

The fund is garbage. The broker with what you've shared breeds incompetence.

Fancy dinners or not, they're not doing their job. Allowing them to do their job properly is probably only going to cost her more.

If she isn't going to go it alone, I'd fine a new broker. Avoid the the big houses and find an independent.

She just needs to tell her parents he's not working for her. My parents broker for 30+ years was an idiot, which was when I started taking care of my own stuff.

691175002

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Re: Expense ratios, how high is too high
« Reply #12 on: April 08, 2015, 03:39:51 PM »
I know people who called their broker around the March 2009 low, and had them sell all their stocks.  I know other people who had their broker call THEM around the March 2009 low, and PUSHED them to sell all their stocks.
I spent some of my summers working retail brokerage so I've seen that kind of thing as well.  Unfortunately if you are knowledgeable enough to evaluate an investment advisor you probably don't need one.

Indexer

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Re: Expense ratios, how high is too high
« Reply #13 on: April 08, 2015, 04:27:13 PM »
Expense ratios, how high is too high?

If you are doing it yourself.  0.2%.  You can get a Vanguard Lifestrategy/Target Retirement fund or build your own portfolio of index funds for less than this.

If you have an advisor.  0.7% ALL IN; so ERs for the funds + the management fee combined should still be under 0.7%.  Actually I would like to say 0.5% ALL IN but I only know of one firm that can actually pull that off... if you guessed Vanguard you would be right.

mrshudson

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Re: Expense ratios, how high is too high
« Reply #14 on: April 08, 2015, 04:53:44 PM »
Anyway, the broker put 100% of their money in GFACX which has an expense ratio of 1.45%. VIGAX seemed somewhat comparable to this with a expense ratio of 0.09%.

To my mind, it's not comparable if the expense ratios are off by an order of magnitude even if the returns are the same.

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Re: Expense ratios, how high is too high
« Reply #15 on: April 08, 2015, 05:40:50 PM »
To answer the question, likely anything over 0.50%.

The best, top, index funds in Canada, U.S. and Internationally cost between 0.05%-0.20% respectively. 

Add a few more % for withholding taxes (for us in Canada) and that bumps you to about 0.50%.  No more is worth it.

Just my $0.02.

bdbrooks

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Re: Expense ratios, how high is too high
« Reply #16 on: April 08, 2015, 06:07:20 PM »
Here is the problem that NO ONE IS SEEING. When they invest in GFACX, they are paying a hell of a lot more than 1.45%. They are paying 1.45% in an expense ratio. They are paying 1% in 12b-1 fees for this fund (this is where the advisor gets paid). These don't even include transaction costs that the mutual funds pay (industry experts estimate these to be between .85-1.35% for the typical actively managed fund). So that 1.45% is actually more like 3.5% I use active strategies (not with mutual funds because they are wicked expensive), but you have to keep costs under control. I think 1% total investment cost is about the most anyone should ever pay for investment management. However, if an advisor does both investment management and financial planning, then you can justify going a little over 1%. Maybe a handful of advisors in the world are worth paying over 3% in fees. If you think that is your advisor...hint, it's not. Mutual Funds are a load of crap that should be gotten rid of. They should roll their products into ETFs where advisors can't hide fees and investors can plainly see just how badly they have been getting screwed.

For an example of 2 etfs that I would consider look at QVAL and FV. Neither have been around for long, but both are built on some of the few free lunches in investing (QVAL on Value premium and Quality premium and FV on Momentum) (as a note on the free lunches, that is if you ride it for the long hall, there will be times of under performance). They aren't cheap .79% and .94% respectively, but I think they will deliver at about 3 times their additional cost. This is the question you should be asking. If you don't expect something to outperform by 3 times their added expense, then you should just take the cheap index)

I know there are people that will disagree with some of my stances, BUT EVERYONE SHOULD LOOK INTO THE FULL COST OF THEIR MUTUAL FUNDS. THE FUND MENTIONED COSTS OVER DOUBLE THE EXPENSE RATIO. The performance of GFACX is actually fairly decent considering 3.5% of the funds were leaking out of the investment boat. It beat Vanguard's S&P500 funds since GFACX's inception, but it underperformed the more comparable Vanguard Growth funds.

Indexer

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Re: Expense ratios, how high is too high
« Reply #17 on: April 08, 2015, 07:02:37 PM »
Here is the problem that NO ONE IS SEEING. When they invest in GFACX, they are paying a hell of a lot more than 1.45%. They are paying 1.45% in an expense ratio. They are paying 1% in 12b-1 fees for this fund (this is where the advisor gets paid). These don't even include transaction costs that the mutual funds pay (industry experts estimate these to be between .85-1.35% for the typical actively managed fund). So that 1.45% is actually more like 3.5% I use active strategies (not with mutual funds because they are wicked expensive), but you have to keep costs under control. I think 1% total investment cost is about the most anyone should ever pay for investment management. However, if an advisor does both investment management and financial planning, then you can justify going a little over 1%. Maybe a handful of advisors in the world are worth paying over 3% in fees. If you think that is your advisor...hint, it's not. Mutual Funds are a load of crap that should be gotten rid of. They should roll their products into ETFs where advisors can't hide fees and investors can plainly see just how badly they have been getting screwed.

...

I know there are people that will disagree with some of my stances, BUT EVERYONE SHOULD LOOK INTO THE FULL COST OF THEIR MUTUAL FUNDS. THE FUND MENTIONED COSTS OVER DOUBLE THE EXPENSE RATIO. The performance of GFACX is actually fairly decent considering 3.5% of the funds were leaking out of the investment boat. It beat Vanguard's S&P500 funds since GFACX's inception, but it underperformed the more comparable Vanguard Growth funds.

Couple quick things.
1.  12b-1 fees are included in the expense ratio.  So the 1.45% includes the 1% 12b-1 fee.
2.  It outperformed the Vanguard 500 index when?  Since inception?  Of which fund?  I don't know why you would ever compare by inception dates unless the funds were formed on the EXACT same inception date.  Comparing on a more traditional basis the 500 index outperforms on every scale.

Source:  Morningstar  (All data as of 3/31 to keep it clean.  Tax data isn't available sooner than 3/31.)
_______1yr_______3yr______5yr_______10yr
GFACX__11.06_____15.8____12.43______7.75
VFIAX___12.69______16.07____14.43_____8.00

3.  You left out tax efficiency as a cost. 
POST tax returns
GFACX__7.6_____14.35_____11.57_____7.16
VFIAX___11.73___15.3______13.83_____7.55

GFACX in a taxable account is going to get killed by all the capital gains distributions.  VFIAX being an index fund is very tax efficient and normally only spits off qualified dividends.  ;)

4.  Personal request.  Bold or upper case.  Both reads like you are screaming at me.  :)

bdbrooks

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Re: Expense ratios, how high is too high
« Reply #18 on: April 08, 2015, 07:40:28 PM »
Couple quick things.
1.  12b-1 fees are included in the expense ratio.  So the 1.45% includes the 1% 12b-1 fee.
2.  It outperformed the Vanguard 500 index when?  Since inception?  Of which fund?  I don't know why you would ever compare by inception dates unless the funds were formed on the EXACT same inception date.  Comparing on a more traditional basis the 500 index outperforms on every scale.

Source:  Morningstar  (All data as of 3/31 to keep it clean.  Tax data isn't available sooner than 3/31.)
_______1yr_______3yr______5yr_______10yr
GFACX__11.06_____15.8____12.43______7.75
VFIAX___12.69______16.07____14.43_____8.00

3.  You left out tax efficiency as a cost. 
POST tax returns
GFACX__7.6_____14.35_____11.57_____7.16
VFIAX___11.73___15.3______13.83_____7.55

GFACX in a taxable account is going to get killed by all the capital gains distributions.  VFIAX being an index fund is very tax efficient and normally only spits off qualified dividends.  ;)

4.  Personal request.  Bold or upper case.  Both reads like you are screaming at me.  :)

1) I'm sorry. I went too quickly. You are correct that 12b-1 fees are included in ER. So the total cost is around 2.5%. However, it is worth looking up what the typical actively managed mutual fund pays in transaction costs that is not included in the ER (this is not your transaction cost when you buy the mutual fund, this is the cost when the mutual fund makes all of its buys and sells).

2) I was not comparing inception of GFACX and inception of VFIAX. I was comparing since the second one was formed. This lets us see the full historical performance that we can see. Check out investspy.com. Put in both tickers and select full history. It will bring in the historical data that all of the funds were both in existence. It also includes dividends to give a wholistic view of things. By this measure it outperformed. However, REMEMBER IN MY ORIGINAL POST I SAID IT WASN'T WORTH IT (I just said the performance was decent, that means that they almost made up for their high cost (apparently I need to this..."that doesn't mean it was worth it").

3) did you read my post? I recommended staying away from GFACX. In particular the only type of active strategies I would use in a taxable account is with ETFs (which gains tax efficiency). I specifically said to stay away from mutual funds since ETFs are more efficient.

4) To each his own.

Indexer

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Re: Expense ratios, how high is too high
« Reply #19 on: April 08, 2015, 08:16:43 PM »
bdbrooks:  I wasn't trying to argue with you. :)  I agree with you that people should stay away from GFACX, and I was trying to add to what you said by adding the note about tax efficiency. 

I was just also pointing out the thing about 12b-1 fees and trying to get some clarification on the inception date.

Sorry if it came off like I was in disagreement.

bdbrooks

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Re: Expense ratios, how high is too high
« Reply #20 on: April 08, 2015, 08:32:33 PM »
bdbrooks:  I wasn't trying to argue with you. :)  I agree with you that people should stay away from GFACX, and I was trying to add to what you said by adding the note about tax efficiency. 

I was just also pointing out the thing about 12b-1 fees and trying to get some clarification on the inception date.

Sorry if it came off like I was in disagreement.

I really hate being wrong. So I probably jumped on the defensive too easily since you were 100% correct that I was mistaken on the 12b-1 fees being included in ER.

Anyway, here is an article that attempts to quantify how much mutual fund transaction costs are. Hint, 1.44% on top of the ER.

http://www.forbes.com/2011/04/04/real-cost-mutual-fund-taxes-fees-retirement-bernicke.html

dsmexpat

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Re: Expense ratios, how high is too high
« Reply #21 on: April 08, 2015, 08:35:30 PM »
Explain the fees that aren't in the ER like I'm brand new please.

bdbrooks

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Re: Expense ratios, how high is too high
« Reply #22 on: April 08, 2015, 10:08:41 PM »
Explain the fees that aren't in the ER like I'm brand new please.

Here is an article that does a good job of spelling it out.
http://www.wsj.com/articles/SB10001424052748703382904575059690954870722

Basically, a mutual fund holds a bunch of securities. For a simple S&P 500 mutual fund (market weighted), they will simply buy 500 companies and they will automatically stay balanced since it is market cap weighted. So they don't have to buy and sell the securities unless S&P switches out companies in the top 500 (even then since it is market cap weighted this adds very little cost). Now let's consider an actively managed mutual fund. They can easily have turnover over 100%. This means that on average they sell all of their securities and buy new ones once a year (200% means twice a year, 50% means they sell half of the securities every year). All of this buying and selling incurs brokerage commissions (think of trading at TE Ameritrade and they charge you $10 a trade). Let's also say the fund has $10 Billion. If they want to sell a 1% position of Facebook, that means they would have to sell $100 million dollars of Facebook stock. This leads to the second part of transaction costs called market impact costs. If they sent $100 million of market orders all at once them facebook's stock would plummet. The order would start to find every investor willing to pay the most money to buy a Facebook share, but since they are selling such huge amounts they end up having to sell at a discount to be able to move that much volume. This is usually the largest portion of the transaction cost problem. The final one is bid-ask spreads. This is the difference between what the highest someone is willing to pay to buy the stock vs the lowest someone is willing to sell the stock for.

If you are looking for a short quick and dirty way to limit these transaction costs, look for low turnover funds. The lower the turnover, the less the trading. The less the trading, the less brokerage commissions, market impact and bid-ask spread costs you will pay. In particular, market cap weighted funds should have the lowest internal transaction costs.

forummm

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Re: Expense ratios, how high is too high
« Reply #23 on: April 09, 2015, 12:03:28 PM »
Here is an article that does a good job of spelling it out.
http://www.wsj.com/articles/SB10001424052748703382904575059690954870722

Does Vanguard have additional expenses on top of the ER? In digging through the VTSAX annual report, I'm not seeing those. The admiral shares have a 10 year annualized total return only 0.01% different from the tracking index (page 11).

https://personal.vanguard.com/funds/reports/q850.pdf?2210098928

This one indicates that about $4.7 million was spent on brokerage commissions. That would be about 0.001227% of the $383B net assets.
https://personal.vanguard.com/pub/Pdf/sai040.pdf?2210096922

dalekeener

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Re: Expense ratios, how high is too high
« Reply #24 on: April 09, 2015, 01:43:21 PM »
This topic really made me think...I have in an IRA funds in PGX (Preferred Stock fund) yields 5.9%. It's expense ratio is .50%, is that too high?  It is hard for me to tell what expense ration is high considering the type of fund invested...

Dale

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Re: Expense ratios, how high is too high
« Reply #25 on: April 09, 2015, 08:35:23 PM »
Here is an article that does a good job of spelling it out.
http://www.wsj.com/articles/SB10001424052748703382904575059690954870722

Does Vanguard have additional expenses on top of the ER? In digging through the VTSAX annual report, I'm not seeing those. The admiral shares have a 10 year annualized total return only 0.01% different from the tracking index (page 11).

https://personal.vanguard.com/funds/reports/q850.pdf?2210098928

This one indicates that about $4.7 million was spent on brokerage commissions. That would be about 0.001227% of the $383B net assets.
https://personal.vanguard.com/pub/Pdf/sai040.pdf?2210096922

Normally the only management related fees not found in the ER would be front end and back end loads.  So GFACX has its loads(1%) built into the ER which is why it is 1.45%.   Another share class of GFACX is AGTHX.  This baby has a lower expense ratio(0.66%) and the load built into the expense ratio is also lower(0.25%), BUT it has a massive 4-5% load on the front end.

Vanguard funds are no load.  So if the 500 index is 0.05%, you are paying 0.05% for the management. 


Now there are 2 other costs that come out of performance or your wallet that aren't listed in the ER.
1.  Trading costs.  The more active a fund is the higher these will be.  Best way to avoid these.... index funds and index ETFs.  VTSAX only has these fees to cover new people buying into the fund or people taking money out of the fund.
2.  Taxes.  Trading also generates capital gains.  If the fund is held in a taxable account these get reported back to the shareholder.  Best way to avoid these... index funds and ETFs.  Less trading.  And normally big index funds like VTSAX are even better at avoiding this problem than they are trading costs because they can try to match gains and losses when they do need to sell to avoid capital gains spilling over to the investors.

Conclusion:  Just more evidence why you should index.

tj

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Re: Expense ratios, how high is too high
« Reply #26 on: April 09, 2015, 11:22:55 PM »
This topic really made me think...I have in an IRA funds in PGX (Preferred Stock fund) yields 5.9%. It's expense ratio is .50%, is that too high?  It is hard for me to tell what expense ration is high considering the type of fund invested...

Dale

That's not much more than the Preferred Stock index ETF

https://www.ishares.com/us/products/239826/ishares-us-preferred-stock-etf

dsmexpat

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Re: Expense ratios, how high is too high
« Reply #27 on: April 17, 2015, 01:19:06 PM »
She met with him last night and has decided to stick with him. Regarding the high fees and low performance he made the case that you can't simply compare two funds and declare the one with the lower fee to be superior, they all have different management and different teams working for them and he is confident that the team that he placed her money with are good enough to justify the fee. He also told her that if she was willing to give him even more money then he'd be able to get her into another even better fund which he believes has a strategy that will be able to consistently beat the market by a significant margin. Not my money so I'm content to let her do her thing and to watch my VTSAX against her investments with the adviser and see which does better.

forummm

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Re: Expense ratios, how high is too high
« Reply #28 on: April 17, 2015, 08:02:38 PM »
She met with him last night and has decided to stick with him. Regarding the high fees and low performance he made the case that you can't simply compare two funds and declare the one with the lower fee to be superior, they all have different management and different teams working for them and he is confident that the team that he placed her money with are good enough to justify the fee. He also told her that if she was willing to give him even more money then he'd be able to get her into another even better fund which he believes has a strategy that will be able to consistently beat the market by a significant margin. Not my money so I'm content to let her do her thing and to watch my VTSAX against her investments with the adviser and see which does better.

The shyster salesman slays another victim. And has the nerve to try to suck more money out of her. I guess that's how he makes a living.

I don't know how the "team" she gave her money to is so good if it can't even beat the S&P 500 over the last 10 years. Maybe if she invests even more money she can under perform the market even more.