Comparing funds and fees question

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Comparing funds and fees question

Postby RandyAdams1978 » Sun Feb 10, 2013 8:44 am

I'm looking at 2 small/mid cap funds, one of which is VG Extended Market Index Fund (VEXMX). The other is Oppenheimer Main St Sm & Mid Cap (OPMYX). I'm comparing these because these are the small/mid cap choices in my Ohio 529 plan.

My correlation analysis shows they correlate within 96%. For similar periods (monthly, back to 8/1/2000), OPMYX averaged 10.52% (the monthly average X 12), while VEXMX averaged 8.49%

The listed annual asset-based fees in the 529 plan for OPMYX is .83%. For VEXMX it's 0.30%

So... to me .... it looks like OPMYX is worth the expense. Right? It's 2 percent better. Even if it's expenses were 2% or 3%, it would STILL be worth it. Yes? Sometimes I have a hard time wrapping my head around the "less is more" philosophy regarding fees here. It's all accounted for in the NAV, right? Expect loads. Loads are NOT included in the NAV. Yes? But as far as annual ER is concerned, it's the returns that matters. Is that right?
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Re: Comparing funds and fees question

Postby livesoft » Sun Feb 10, 2013 8:51 am

I didn't even look at any info on these funds, but if I was doing a comparison, I would look at a "growth of" chart on Morningstar.com to see if there was a one-time event that led to one fund behaving differently than the other. I would also add a few more funds to the comparison to see what I might have expected from other asset classes.

Also would look inside the funds: does the Opp fund have foreign stocks? Does the Opp fund have some cash or bonds? Is there a value or growth tilt which may have benefitted the Opp fund, but not the ExtendedMarket fund? Were there periods where either fund underperformed? Overperformed? What was going on historicially during those periods?
Last edited by livesoft on Sun Feb 10, 2013 8:55 am, edited 1 time in total.
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: Comparing funds and fees question

Postby livesoft » Sun Feb 10, 2013 8:53 am

OK, I did the chart. Do you see what I see?
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: Comparing funds and fees question

Postby RandyAdams1978 » Sun Feb 10, 2013 8:58 am

I see that since 2008, VEXMX has done better. Is that what you're seeing?
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Re: Comparing funds and fees question

Postby RandyAdams1978 » Sun Feb 10, 2013 9:02 am

So... since they're so closely correlated, and "better" depends largely on the historic time frame one analyzes .... go with the cheaper fund?
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Re: Comparing funds and fees question

Postby midareff » Sun Feb 10, 2013 9:06 am

It has been said the more realistic forecaster of success is the lower the fee.
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Re: Comparing funds and fees question

Postby livesoft » Sun Feb 10, 2013 9:17 am

RandyAdams1978 wrote:I see that since 2008, VEXMX has done better. Is that what you're seeing?

No, that is not what I am seeing. What if you do a 10-year chart instead of starting from 8/1/2000? An 11-year chart?
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: Comparing funds and fees question

Postby RandyAdams1978 » Sun Feb 10, 2013 9:24 am

Well, just playing with the chart a little tells alot. Put in 8/1/2001 as the start date and Oppenheimer wins the "Growth of $10,000" race. Start the chart a year later and VEXMX wins.
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Re: Comparing funds and fees question

Postby RandyAdams1978 » Sun Feb 10, 2013 9:27 am

And, if you keep "indexing" the start date of the chart a year at a time, VEXMX "wins" most of the time.
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Re: Comparing funds and fees question

Postby livesoft » Sun Feb 10, 2013 9:41 am

Now please go back and re-read your original post and pretend it was not written by you. How would you answer the OP's query?
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: Comparing funds and fees question

Postby RandyAdams1978 » Sun Feb 10, 2013 11:36 am

I would tell the poster that since the two funds are so highly correlated AND since it appears that either one could outdo the other for a given time frame -- go with the lower fees.

If the higher-feed fund were consistently trouncing the lower-feed fund that would be a different story. But that's not the case.
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Re: Comparing funds and fees question

Postby pkcrafter » Sun Feb 10, 2013 1:42 pm

Randy, these two funds are substantially different. OPMYX has 32% in small, and VEXMX has 48% in small. The cap size of OPMYX is ~50% higher than VEXMX. Harder to approximate TSM with OPMYX.

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