Low Fee Index Funds?

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Low Fee Index Funds?

Postby Vanner » Fri May 03, 2013 8:04 pm

Hi, brand new Boglehead forum member here, this is a very interesting Forum.

On the recent Frontline Special about 401k's Jack Bogle mentioned "Index Funds" with only a 1% fee. Listed below are some of the choices my Deferred Comp plan offers. Are any of these exactly what he was referring to?
Russell 2000 Benchmark Index
MSCI EAFE Benchmark Index
Vanguard Mid Cap Index Fund
Spliced Mid Cap Benchmark Index
Vanguard Institutional Index Fund
S&P 500 Benchmark Index
Vanguard Balanced Index Fund
Vanguard Balanced Composite Benchmark Index
Vanguard Total Bond Market Fund
Barclays Capital Aggregate Bond Benchmark Index

Also, The fee column Lists the Gross Fund EXP % and the Admin fee %. Are those percentages of the gains only, or the principal plus gains?
I have only recently taken an interest in investing and don't understand a lot of the lingo, yet. So if you could keep your answers simple for me, I would appreciate it. Thank you.
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Re: Low Fee Index Funds?

Postby Johm221122 » Fri May 03, 2013 8:45 pm

The fees are on your total amount of fund,that includes principal plus gains
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Re: Low Fee Index Funds?

Postby CABob » Fri May 03, 2013 8:52 pm

You can check the expense ratios for funds from the fund's website, Vanguard or whoever. The information is also available from a site like Morningstar. I think you will find that Vanguard's index funds will all have expenses at 0.2% or less. The expense percentage would be applied on the total value of the fund on an annual basis.
As a matter of understanding the question you are asking and terminology, the index does not have an expense associated with it, but, a mutual fund that tracks that index will have an expense associated with it.
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Re: Low Fee Index Funds?

Postby Johm221122 » Fri May 03, 2013 9:01 pm

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Re: Low Fee Index Funds?

Postby livesoft » Fri May 03, 2013 9:02 pm

The funds listed by the OP have low expense ratios by the standards of the forum. However, these great funds could still be used in a 401(k) plan with other fees.

For example, Vanguard reports that the Vanguard Institutional Index fund has an expense ratio of 0.04%. If Vanner's fee column lists 0.04% as the gross expense ratio for this fund, then that is good. If the Admin fee % column is more than that, then something else is going on.

So Vanner what are the exact numbers reported for this fund?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Low Fee Index Funds?

Postby Vanner » Fri May 03, 2013 9:06 pm

My sheet states the Vanguard Institutional Index Fund has a 0.02% Gross Fund EXP and 0.05% Admin Fee.
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Re: Low Fee Index Funds?

Postby Vanner » Fri May 03, 2013 9:16 pm

:oops:
I think I listed some of the Indexes as if they were funds. Is that what I did?

Vanguard Mid Cap Index Fund
Spliced Mid Cap Benchmark Index
Vanguard Institutional Index Fund
S&P 500 Benchmark Index
Vanguard Balanced Index Fund
Vanguard Balanced Composite Benchmark Index
Vanguard Total Bond Market Fund
Barclays Capital Aggregate Bond Benchmark Index

So the italicized Indexes are just a baseline to measure the above fund against?
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Re: Low Fee Index Funds?

Postby Johm221122 » Fri May 03, 2013 9:18 pm

Vanner wrote::oops:
I think I listed some of the Indexes as if they were funds. Is that what I did?

Vanguard Mid Cap Index Fund
Spliced Mid Cap Benchmark Index
Vanguard Institutional Index Fund
S&P 500 Benchmark Index
Vanguard Balanced Index Fund
Vanguard Balanced Composite Benchmark Index
Vanguard Total Bond Market Fund
Barclays Capital Aggregate Bond Benchmark Index

So italicized Indexes are just a baseline to measure the above fund against?

Yes
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Re: Low Fee Index Funds?

Postby livesoft » Fri May 03, 2013 9:19 pm

So as far as expenses go, your funds are probably best-in-class and one cannot improve on that aspect of your funds. So you can smile about the Frontline report and pretty much say, "Thank goodness that Frontline report does not apply to my situation."
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Low Fee Index Funds?

Postby Vanner » Fri May 03, 2013 9:35 pm

livesoft wrote:So as far as expenses go, your funds are probably best-in-class and one cannot improve on that aspect of your funds. So you can smile about the Frontline report and pretty much say, "Thank goodness that Frontline report does not apply to my situation."


So as far as fees go, you are saying these Gross fund EXP's and Admin fees are relatively low?

. ...................................Gross Fund EXP, Admin Fee
Vanguard Mid Cap Index Fund 0.06% 0.05%

Vanguard Institutional Index Fund 0.02% 0.05%

Vanguard Balanced Index Fund 0.08% 0.05%

Vanguard Total Bond Market Fund 0.05% 0.05%
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Re: Low Fee Index Funds?

Postby Johm221122 » Fri May 03, 2013 9:44 pm

Vanner wrote:
livesoft wrote:So as far as expenses go, your funds are probably best-in-class and one cannot improve on that aspect of your funds. So you can smile about the Frontline report and pretty much say, "Thank goodness that Frontline report does not apply to my situation."


So as far as fees go, you are saying these Gross fund EXP's and Admin fees are relatively low?

. ...................................Gross Fund EXP, Admin Fee
Vanguard Mid Cap Index Fund 0.06% 0.05%

Vanguard Institutional Index Fund 0.02% 0.05%

Vanguard Balanced Index Fund 0.08% 0.05%

Vanguard Total Bond Market Fund 0.05% 0.05%

Basically, there the best you could ever hope for
John
Last edited by Johm221122 on Fri May 03, 2013 9:44 pm, edited 1 time in total.
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Re: Low Fee Index Funds?

Postby grabiner » Fri May 03, 2013 9:44 pm

Vanner wrote:So as far as fees go, you are saying these Gross fund EXP's and Admin fees are relatively low?

. ...................................Gross Fund EXP, Admin Fee
Vanguard Mid Cap Index Fund 0.06% 0.05%

Vanguard Institutional Index Fund 0.02% 0.05%

Vanguard Balanced Index Fund 0.08% 0.05%

Vanguard Total Bond Market Fund 0.05% 0.05%


You have a great deal. Apparently, you pay an extra 0.05% administrative fee to operate the 401(k), which is added to the costs of your funds to get total expenses, but 0.05% is a very low additional cost and you have extra-low-cost institutional shares of the funds. Even with the extra fee, you pay 0.10% for Total Bond Market Index, which is the same cost available to retail Vanguard investors with $10,000 to invest. And you pay 0.07% for Institutional Index (an S&P 500 index fund); while Vanguard makes the fund available at retail for 0.05%, that's a trivial difference.

The funds you listed don't include the small-cap (Russell 2000) or international (MSCI EAFE) indexes; check the expenses on those funds. If your 401(k) doesn't have a low-cost small-cap or international fund, then you can hold those funds in your IRA; Vanguard offers Small-Cap Index and Total International Index at low costs.
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Re: Low Fee Index Funds?

Postby Vanner » Fri May 03, 2013 10:06 pm

Johm221122 wrote:Basically, there the best you could ever hope for
John

Wow, that is good news. I had no idea!
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Re: Low Fee Index Funds?

Postby dbr » Sat May 04, 2013 9:41 am

It was noted about that program that Jack must surely have meant ERs of 0.1% not 1.0%. 1.0% is probably a mid-high fee for mutual funds, but no investor should be paying more than about 0.00%-0.05% for total market index funds and maybe up to 0.20% for more specialized index or low cost active funds. (Little known fact: All Vanguard US Treasury bond funds are not index funds.)
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Re: Low Fee Index Funds?

Postby steve r » Sat May 04, 2013 9:58 am

grabiner wrote:The funds you listed don't include the small-cap (Russell 2000) or international (MSCI EAFE) indexes; check the expenses on those funds. If your 401(k) doesn't have a low-cost small-cap or international fund, then you can hold those funds in your IRA; Vanguard offers Small-Cap Index and Total International Index at low costs.

+1 ... you will want to add this ... most would agree you should have a sizable amount of international ...a lesser amount of additional small is needed because you have a small amount of small in your total indexes already ...
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Re: Low Fee Index Funds?

Postby steve r » Sat May 04, 2013 10:07 am

dbr wrote:It was noted about that program that Jack must surely have meant ERs of 0.1% not 1.0%.

Noted by who .... I mean I noted he said 1 percent as well ... but was it noted by someone more than bloggers on BH?

Sadly, I think a lot of people either would be thrilled with ER around 0.50 because they would be much lower than they currently have.
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Re: Low Fee Index Funds?

Postby skylar » Sat May 04, 2013 10:23 am

dbr wrote:It was noted about that program that Jack must surely have meant ERs of 0.1% not 1.0%. 1.0% is probably a mid-high fee for mutual funds, but no investor should be paying more than about 0.00%-0.05% for total market index funds and maybe up to 0.20% for more specialized index or low cost active funds. (Little known fact: All Vanguard US Treasury bond funds are not index funds.)


According to Vanguard, the average total stock market fund has an ER of 1.11%, so 1.00% is a bit below average. An average total bond market fund has an ER of 0.89%, so 1% would be a bit above average for a bond fund. Sad facts, but true.
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Re: Low Fee Index Funds?

Postby greg24 » Sun May 05, 2013 12:03 am

Vanner wrote:
Johm221122 wrote:Basically, there the best you could ever hope for
John

Wow, that is good news. I had no idea!


I agree that you have one of the best plans out there. Find an asset allocation you are comfortable with, and contribute as much as you can. Then enjoy life. :happy
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Re: Low Fee Index Funds?

Postby Vanner » Mon May 06, 2013 8:06 pm

Thank you for the responses.
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