Question about Fees

[MrsDinero]

As I've been trying to educate myself about what my 401k is doing and how I might want to invest later, I have been noticing a lot of talk about fees and how they can really eat into your investments.   Obviously I want something that is low fee, but will still grow.  How do I find those?  What is an "acceptable" fee.  I've attached my 401k fees my current holdings.  Can you tell me if these are good or bad?

[teen persuasion]

http://www.marketwatch.com/story/best-target-date-funds-fidelity-vs-vanguard-2015-04-15

I believe that article should answer your question, even if it doesn't compare TRP funds.

[ShoulderThingThatGoesUp]

0.74% isn't great. My 401k through Fidelity has a 0.02% option available. My taxable account through Schwab has a 0.04% ETF. Both of these are "total market" US-based funds.

[MrsDinero]

http://www.marketwatch.com/story/best-target-date-funds-fidelity-vs-vanguard-2015-04-15

I believe that article should answer your question, even if it doesn't compare TRP funds.

Thank you for the link!

[NoStacheOhio]

As I've been trying to educate myself about what my 401k is doing and how I might want to invest later, I have been noticing a lot of talk about fees and how they can really eat into your investments.   Obviously I want something that is low fee, but will still grow.  How do I find those?  What is an "acceptable" fee.  I've attached my 401k fees my current holdings.  Can you tell me if these are good or bad?

Could you post your other fund choices with your plan?

[MrsDinero]

As I've been trying to educate myself about what my 401k is doing and how I might want to invest later, I have been noticing a lot of talk about fees and how they can really eat into your investments.   Obviously I want something that is low fee, but will still grow.  How do I find those?  What is an "acceptable" fee.  I've attached my 401k fees my current holdings.  Can you tell me if these are good or bad?

Could you post your other fund choices with your plan?

These are the available Target Date Plans I have available to me:
TRP RETIREMENT 2005 (TRRFX)
TRP RETIREMENT 2010 (TRRAX)
TRP RETIREMENT 2015 (TRRGX)
TRP RETIREMENT 2020 (TRRBX)
TRP RETIREMENT 2025 (TRRHX)
TRP RETIREMENT 2030 (TRRCX)
*TRP RETIREMENT 2035 (TRRJX)
TRP RETIREMENT 2040 (TRRDX)
TRP RETIREMENT 2045 (TRRKX)
TRP RETIREMENT 2050 (TRRMX)
TRP RETIREMENT 2055 (TRRNX)


These are the "manage my own" funds available:
Name/Inception Date   Asset Class   Category
FID CONTRAFUND (FCNTX)05/17/1967
Stock Investments   Large Cap
INVS DIVRS DIVD R5 (DDFIX)12/31/2001
Stock Investments   Large Cap
SPTN 500 INDEX ADV (FUSVX)02/17/1988
Stock Investments   Large Cap
SPTN TOT MKT IDX ADV (FSTVX)11/05/1997
Stock Investments   Large Cap
TRP DIV GROWTH ADV (TADGX)12/30/1992
Stock Investments   Large Cap
FID LOW PRICED STK (FLPSX)12/27/1989
Stock Investments   Mid-Cap
PRU/J MID CAP GR A (PEEAX)12/31/1996
Stock Investments   Mid-Cap
RDGWTH MID CAP VAL I (SMVTX)11/30/2001
Stock Investments   Mid-Cap
SPTN EXT MKT IDX ADV (FSEVX)11/05/1997
Stock Investments   Mid-Cap
SPTN MID CAP IDX ADV (FSCKX)09/08/2011
Stock Investments   Mid-Cap
FID SM CAP DISCOVERY (FSCRX)09/26/2000
Stock Investments   Small Cap
JANUS TRITON T (JATTX)02/25/2005
Stock Investments   Small Cap
SPTN SM CAP IDX ADV (FSSVX)09/08/2011
Stock Investments   Small Cap
DREY WW GROWTH I (DPWRX)07/15/1993
Stock Investments   International
HARBOR INTL INV (HIINX)12/29/1987
Stock Investments   International
INVS INTL GROWTH R5 (AIEVX)04/07/1992
Stock Investments   International
OAKMARK INTL I (OAKIX)09/30/1992
Stock Investments   International
OPPHMR DEV MKTS A (ODMAX)11/18/1996
Stock Investments   International
SPTN EM MKTS IDX ADV (FPMAX)09/08/2011
Stock Investments   International
SPTN GLB XUS IDX ADV (FSGDX)09/08/2011
Stock Investments   International
SPTN INTL INDEX ADV (FSIVX)11/05/1997
Stock Investments   International
AM CENT UTIL INV (BULIX)03/01/1993
Stock Investments   Specialty
COHEN & STEERS RLTY (CSRSX)07/02/1991
Stock Investments   Specialty
FID SEL MED EQ & SYS (FSMEX)04/28/1998
Stock Investments   Specialty
FKLN GOLD&PRC MTL A (FKRCX)05/19/1969
Stock Investments   Specialty
SPTN REAL ES IDX ADV (FSRVX)09/08/2011
Stock Investments   Specialty
BLKRK GLOBAL ALLOC A (MDLOX)02/03/1989
Stock Investments   N/A
JANUS BALANCED T (JABAX)09/01/1992
Blended Investment*   N/A
TRP RETIRE BAL (TRRIX)09/30/2002
Blended Investment*   N/A
TRP RETIREMENT 2005 (TRRFX)02/27/2004
Blended Investment*   N/A
TRP RETIREMENT 2010 (TRRAX)09/30/2002
Blended Investment*   N/A
TRP RETIREMENT 2015 (TRRGX)02/27/2004
Blended Investment*   N/A
TRP RETIREMENT 2020 (TRRBX)09/30/2002
Blended Investment*   N/A
TRP RETIREMENT 2025 (TRRHX)02/27/2004
Blended Investment*   N/A
TRP RETIREMENT 2030 (TRRCX)09/30/2002
Blended Investment*   N/A
  TRP RETIREMENT 2035 (TRRJX)02/27/2004
Blended Investment*   N/A
TRP RETIREMENT 2040 (TRRDX)09/30/2002
Blended Investment*   N/A
TRP RETIREMENT 2045 (TRRKX)05/31/2005
Blended Investment*   N/A
TRP RETIREMENT 2050 (TRRMX)12/29/2006
Blended Investment*   N/A
TRP RETIREMENT 2055 (TRRNX)12/29/2006
Blended Investment*   N/A
WF STABLE FUND C06/01/2006
Bond Investments   Stable Value
FID CAPITAL & INCOME (FAGIX)11/01/1977
Bond Investments   Income
FID NEW MARKETS INC (FNMIX)05/04/1993
Bond Investments   Income
METWEST TOT RTN BD M (MWTRX)03/31/1997
Bond Investments   Income
PIMCO REAL RTN BD AD (PARRX)01/29/1997
Bond Investments   Income
TMPL GLOBAL BOND A (TPINX)09/18/1986
Bond Investments   Income
FID GOVT MMRK PRM (FZCXX)02/05/19907 day yield as of11/30/2015   

[MustacheAndaHalf]

While I won't lookup fees for that whole list, I wanted to provide two tips for scanning lists of funds.  If you see "Vanguard" or "Spartan"(Fidelity's) in the fund name, the fee is going to be low.  Both of those sets of mutual funds aim for low expense ratios, so you save money on the lower costs.

If you see "index", "S&P", "Russell", or "MSCI" you're probably looking at an index fund.  That's another sign you're looking at lower costs, compared to active funds.

[arebelspy]

+1 to MAH's Spartan fund comment.

This, for example: SPTN 500 INDEX ADV

Expense ratio is 0.05%. Your current 0.74% is 14.8X higher.

Figure out a good AA you'd prefer based on your choices (large/small cap, international, bonds), and find the lower ER funds of those.  You've got some solid choices.

[NoStacheOhio]

The bond choices kind of suck, but FSTVX is a solid, low ER total US index fund and FSGDX if you want global (minus US).

[JPatch]

Spartan funds are solid.  Their expenses are roughly equal to their Vanguard counterparts.  I see the Spartan Total Market Index Fund is there.  My plan has some Spartan funds, but is missing that one - so frustrating!

[MrsDinero]

I've spent some time looking at my available investments, fees, and average returns.  I rebalanced my 401k in December to the TRP RETIREMENT 2035 before posting my question about fees here.

Going forward, I thought I would start with changing my current investments, but wanted to run them by the MMM community first.

Here is what I am thinking:

50% in SPTN 500 INDEX ADV (FUSVX) - Large Cap - Fee 0.07%
20% in SPTN INTL INDEX ADV (FSIVX) - International - Fee 0.17%
20% in SPTN SM CAP IDX ADV (FSSVX) - Small Cap - Fee 0.23%

Either
10% in SPTN EXT MKT IDX ADV (FSEVX)- Mid Cap - Fee 0.07%   Short term trading fees of .75% for fee eligible shares held less than 90 days.

OR

Keep 10% in TRP RETIREMENT 2035 - Fee 0.74%

Does this look like a good mix?

[seattlecyclone]

The Extended Market fund is not really a "mid cap" fund. In reality it's the total market minus the S&P 500. If you want to approximate a total market index fund, you'll buy S&P 500 and Extended Market in a 4:1 ratio. If you want to make a bet on small cap stocks by devoting 20% of your account to them above and beyond what the Extended Market fund already contains, that's a reasonable choice to make. I just want to be sure you're going into it with full knowledge that that's what you're doing.

I personally weight international assets a little bit higher than 20%. Vanguard's target date funds devote about 40% to international stocks and bonds, for what it's worth. Feel free to do something a little bit different though! 20% isn't "bad" by any means.

[JZinCO]

The Extended Market fund is not really a "mid cap" fund. In reality it's the total market minus the S&P 500.

Agreed; FYI FSEVX also currently drifts towards growth companies and is not squarely in 'true' blend/core. Maybe that's also true of the underlying index, but I hold value in value so it would give me pause for thought.
If you want exposure to small cap and mid cap, you could just buy Fidelity's total stock market. For what it's worth I hold the spartan sp500, mid cap and small cap indices individually because I weight mid cap and small cap more heavily than the total stock market index.

Also want to throw out there that purchasing the International index is an choice to not hold emerging markets. For me, I made that mistake this year and traded the intl index for the global ex us index yesterday.

[MustacheAndaHalf]

MrsDinero - Most target date funds have a small allocation to bonds - Vanguard's Target Retirement 2035 allocates 18% to bonds.  Instead of putting your last 10% back into a target date fund, what about a Total Bond index?  Does your retirement plan have any "bond index" or "total bond" type funds?

[wudged]

While I won't lookup fees for that whole list, I wanted to provide two tips for scanning lists of funds.  If you see "Vanguard" or "Spartan"(Fidelity's) in the fund name, the fee is going to be low.  Both of those sets of mutual funds aim for low expense ratios, so you save money on the lower costs.

Just be aware this isn't always necessarily true once you factor in all the bologna fees added on top of the actual investment.  I have VT (Vanguard Total World Stock ETF) available in my 401k, which has an expense of 0.17 from Vanguard directly, however is actually 1.33 after the advisor and the holding company tack on their share.

[MustacheAndaHalf]

While I won't lookup fees for that whole list, I wanted to provide two tips for scanning lists of funds.  If you see "Vanguard" or "Spartan"(Fidelity's) in the fund name, the fee is going to be low.  Both of those sets of mutual funds aim for low expense ratios, so you save money on the lower costs.

Just be aware this isn't always necessarily true once you factor in all the bologna fees added on top of the actual investment.  I have VT (Vanguard Total World Stock ETF) available in my 401k, which has an expense of 0.17 from Vanguard directly, however is actually 1.33 after the advisor and the holding company tack on their share.

That's surprising, and costly over time.  (EDIT: math was wrong, but estimate roughly 1%/year)

While I'm not a lawyer, aren't participants in a 401(k) plan are owed a fiduciary responsibility by those running the plan?  They might have a legal responsibility to follow the "prudent investor rule".

[Mighty-Dollar]

Vanguard's S&P 500 index fund VOO has fees of 0.05% per year. This is low.

After 30 years, a 0.75% annual fee will cost you 25% in lost returns.

[wudged]

While I won't lookup fees for that whole list, I wanted to provide two tips for scanning lists of funds.  If you see "Vanguard" or "Spartan"(Fidelity's) in the fund name, the fee is going to be low.  Both of those sets of mutual funds aim for low expense ratios, so you save money on the lower costs.

Just be aware this isn't always necessarily true once you factor in all the bologna fees added on top of the actual investment.  I have VT (Vanguard Total World Stock ETF) available in my 401k, which has an expense of 0.17 from Vanguard directly, however is actually 1.33 after the advisor and the holding company tack on their share.

That's surprising, and costly over time.  If you save for 35 years and lose 1.16% from these fees each year, you'll wind up with 50% less in retirement money (1.0116 ^^ 35 = 1.50).

While I'm not a lawyer, aren't participants in a 401(k) plan are owed a fiduciary responsibility by those running the plan?  They might have a legal responsibility to follow the "prudent investor rule".

Unfortunately I have not been able to find any definitive rules as to what is considered fair vs irresponsible.  I checked ERISA, and from what I can tell, it just makes vague statements which can be up to interpretation.

[NoStacheOhio]

While I'm not a lawyer, aren't participants in a 401(k) plan are owed a fiduciary responsibility by those running the plan?  They might have a legal responsibility to follow the "prudent investor rule".

Even if they do have fiduciary responsibility, those fees aren't outside of what's considered "normal" for the industry. Crazy? Absolutely. Legal? Probably.

[MustacheAndaHalf]

While I'm not a lawyer, aren't participants in a 401(k) plan are owed a fiduciary responsibility by those running the plan?  They might have a legal responsibility to follow the "prudent investor rule".

Even if they do have fiduciary responsibility, those fees aren't outside of what's considered "normal" for the industry. Crazy? Absolutely. Legal? Probably.

Charging the client 1.33% for something publicly available for 0.17% (Vanguard Total World) is the key idea in my post.  The question is how 1.16% in extra fees is in the client's best interest, for the identical product?

[NoStacheOhio]

Charging the client 1.33% for something publicly available for 0.17% (Vanguard Total World) is the key idea in my post.  The question is how 1.16% in extra fees is in the client's best interest, for the identical product?

The 1.33% is all the fees combined. The advisor and holding company fees are considerably less than that when viewed in isolation. That doesn't make it morally defensible.

[Jack]

TRP RETIREMENT 2035

Are you at least 45 years old? If you're younger than that, a 2035 target-date fund is almost certainly too conservative.

In my opinion, an early retiree (and especially a very early retiree) should have a much more aggressive portfolio than a target-date fund targeted at the year he turns 65 would imply (let alone one targeted at his FIRE date!) because (a) he needs the portfolio to last longer thus rely more on growth, and (b) he can accept more risk because he's still young and healthy enough to return to work if necessary. For that reason, if you wanted a target-date fund, it should be one with a date farther into the future than "normal."

Besides, I like the 10% extended-market fund option better anyway.

[seattlecyclone]

I've heard about a few court cases working their way through the system in an effort to get a better definition of how high fees can be before they break the fiduciary responsibility.

It's important to keep in mind that a 401(k) plan does have administrative expenses above and beyond the fees for the underlying funds in the plan. My own employer charges every participant a flat fee per year to cover these expenses, while other employers go the route of charging on a percentage basis or selecting high-fee funds where the fund companies eat the charges. Tacking on 1.16% does sound high, but maybe it's not that outrageous for a small employer's plan.