Should I deviate from my simple portfolio to save on fees?

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Ericular
Posts: 4
Joined: Sat Feb 06, 2016 1:28 am

Should I deviate from my simple portfolio to save on fees?

Post by Ericular » Sat Jan 12, 2019 2:07 pm

Through my employer, I'm fortunate to have access to both a 403(b) and 457 plan.

The employer will only match funds to the 403(b), but the 457 has lower cost options, so I contribute just enough to match, and the rest to 457 (and Roth IRA). Hopefully someday I can max out all three! :)

To keep it simple, I've been putting the 403(b) funds into a Target Date Fund, with a total fee of 1.00%. In the 457 and Roth IRA, I have access to many low cost options, Vanguard + others.

Currently 25% of my annual retirement contributions end up in the 403(b), and 75% elsewhere.

There is one low(er) cost option in my 403(b) - VMGIX - Vanguard Mid-Cap Growth Index Fund. Its total fee is 0.44%. Moving to this would save me around $500/year for every $100,000 invested. However, I'm a fan of simple - either Vanguard 3/4 fund mix, or target date funds.

For VMGIX, I like the words "Vanguard" and "Index", and I could compensate my overall AA elsewhere. However, I don't know how much unnecessary risk a "mid-cap growth" index would introduce as 25% of my portfolio. I do like the idea of saving on fees, but is this fund abnormally risky as a chunk of a typical Vanguard Total Stock/International/Bond setup?

I know it's really up to me and my comfort level, but I'm interested to hear how open you all are to deviating from the Boglehead simplicity philosophy in order to avoid high-fee funds.

Thanks in advance,
Eric

stan1
Posts: 7220
Joined: Mon Oct 08, 2007 4:35 pm

Re: Should I deviate from my simple portfolio to save on fees?

Post by stan1 » Sat Jan 12, 2019 2:13 pm

I would not put 25% of my portfolio in Vanguard Mid-Cap Growth Index.

Is the target date fund the option with the next lowest expense ratio? What other choices do you have with an expense ratio of less than 1%

Edited: I think you answered that question, there is only one fund with an expense ratio under 1%, correct. In that case I would reluctantly use the 1% expense ratio Target Retirement Fund.

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