Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

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phxjcc
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Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by phxjcc » Thu Feb 21, 2019 1:41 pm

Ok gang, tell me why not.

It is a fund of the funds that everyone here recommends.

No balancing worries, just sell when you need money.

retiredjg
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Re: Super Lazy portfolio, just VSMGX?

Post by retiredjg » Thu Feb 21, 2019 2:05 pm

A fund of funds may not be the best choice for a taxable account.

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Re: Super Lazy portfolio, just VSMGX?

Post by Texanbybirth » Thu Feb 21, 2019 2:25 pm

You can do a whole lot worse, and I'd bet probably not a whole lot better. Though of course you could do slightly better with more work.
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Re: Super Lazy portfolio, just VSMGX?

Post by willthrill81 » Thu Feb 21, 2019 2:38 pm

In a tax-advantaged account, it's perfectly fine. It's actually the fund Jim at the White Coat Investor advocated as part of the 'bare minimum'.
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Re: Super Lazy portfolio, just VSMGX?

Post by livesoft » Thu Feb 21, 2019 2:41 pm

We own shares of this fund. They are in an inherited IRA.

If one has no taxable accounts, then I think it is a great fund.

And if one has taxable accounts, it is still a great fund, but I would have something else in the taxable accounts.[*]
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Re: Super Lazy portfolio, just VSMGX?

Post by ruralavalon » Thu Feb 21, 2019 3:03 pm

phxjcc wrote:
Thu Feb 21, 2019 1:41 pm
Ok gang, tell me why not.

It is a fund of the funds that everyone here recommends.

No balancing worries, just sell when you need money.
Vanguard LifeStrategy Moderate Growth Fund (VSMGX) is an excellent all-in-one fund for a portfolio that consists of tax-advantaged accounts.
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Re: Super Lazy portfolio, just VSMGX?

Post by ERguy101 » Thu Feb 21, 2019 3:10 pm

I personally love funds like this. I have a lot of money in FFNOX which is similar. It cracks me up we can make a retirement portfolio with a single fund, and likely do better than all these people who have expensive financial planners that have them in all these ridiculous tech/energy/health sector high fee mutual funds.

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Re: Super Lazy portfolio, just VSMGX?

Post by phxjcc » Thu Feb 21, 2019 3:18 pm

livesoft wrote:
Thu Feb 21, 2019 2:41 pm
We own shares of this fund. They are in an inherited IRA.

If one has no taxable accounts, then I think it is a great fund.

And if one has taxable accounts, it is still a great fund, but I would have something else in the taxable accounts.[*]
* = ?

Sooooo, is there a CA muni fund version of this? :beer

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Re: Super Lazy portfolio, just VSMGX?

Post by nisiprius » Thu Feb 21, 2019 3:37 pm

There's no reason why not. Do it. Don't read the rest of this post.

For a 401(k) plan, where HR wants to guide or even default workers into a suitable fund, a target date fund is better, because they don't need to look at a table of ages to figure out whether to pick aggressive, moderate, or conservative; and they don't need to review it every few years to see whether it needs to be changed.

For an individual investor, it's the usual sort of "cake mix" issue. Why don't I use (in my case, being retired) VASIX, the Vanguard LifeStrategy Income Fund? Because, eh, it doesn't have enough TIPS for my taste, and it has too much international for my taste, and (amazingly because I'm very conservative) it has a lower stock allocation than I want. And while I can't think of any reason to avoid international bonds, I can't think of any reason to have them, either.

You know. Some people are OK using all-in-one pumpkin spice, and some take the trouble of using separate spices because they like cinnamon and dislike nutmeg.
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Re: Super Lazy portfolio, just VSMGX?

Post by livesoft » Thu Feb 21, 2019 3:39 pm

phxjcc wrote:
Thu Feb 21, 2019 3:18 pm
Sooooo, is there a CA muni fund version of this? :beer
I don't live in a state with state income taxes, so I have not explored this. There is the Vanguard Tax-managed Balanced fund VTMFX which is most of the way there. I would not use it.
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Re: Super Lazy portfolio, just VSMGX?

Post by phxjcc » Thu Feb 21, 2019 4:02 pm

livesoft wrote:
Thu Feb 21, 2019 3:39 pm
phxjcc wrote:
Thu Feb 21, 2019 3:18 pm
Sooooo, is there a CA muni fund version of this? :beer
I don't live in a state with state income taxes, so I have not explored this. There is the Vanguard Tax-managed Balanced fund VTMFX which is most of the way there. I would not use it.
Thanks!

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Re: Super Lazy portfolio, just VSMGX?

Post by Aptenodytes » Thu Feb 21, 2019 5:19 pm

Or the more conservative, LifeStrategy Conservative Growth (VSCGX). I have started using this fund as my primary comparison benchmark (in a virtual portfolio that matches my stock-bond mix). I use it because it is where I'd be if I gave up my a la carte approach. Even if you don't invest in one of these all-in-one funds it can be helpful to use them as a point of comparison. After two full years of tracking against such a benchmark, I am comforted that when the time comes to move to "super lazy" by necessity (for example, I die before my spouse, who is not interested in these things, or my declining faculties require it), the new portfolio will behave very similarly except for requiring no maintenance.

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Re: Super Lazy portfolio, just VSMGX?

Post by Quaestner » Thu Feb 21, 2019 6:13 pm

Ok, I'll say it. Don't do it because you'll save money by buying admiral shares of total stock, total bond, and the total internationals because the expense ratios are lower than in the Life Strategy Funds. Is it worth the hassle to rebalance the separate funds? That may depend on the value of your time and the size of your portfolio!

(Also, if this is in taxable, since we expect the individual funds to not be completely correlated, you may get more tax loss harvesting opportunities with separate funds than in a fund of funds. Furthermore, making your portfolio more tax efficient later on - say by keeping bonds in tax sheltered accounts, and stocks in taxable accounts - might be more of a hassle using the Life Strategy Fund. Learned this the hard way!)

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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by lassevirensghost » Thu Feb 21, 2019 7:48 pm

I keep seeing "it is bad for taxable" and understand the argument, but exactly how bad is bad? How much drag would it actually produce?
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by willthrill81 » Thu Feb 21, 2019 7:53 pm

lassevirensghost wrote:
Thu Feb 21, 2019 7:48 pm
I keep seeing "it is bad for taxable" and understand the argument, but exactly how bad is bad? How much drag would it actually produce?
You can take a look at the "Price & Performance" tab on Vanguard's page for the fund to get a rough idea. The annual returns after maximum federaltaxes on distributions have averaged about .8-.9% lower than the pre-tax returns. Unless you're in the top marginal tax bracket, the difference would be smaller, although you must also take into account state income tax if that applies to you.

The general reason is because the bonds the fund contains are not as tax efficient as the equities. General consensus says to put bonds in tax-advantaged accounts and to put equities in taxable accounts, although of course you would put everything in tax-advantaged space if you could, and if you have no choice but to put bonds in a taxable account, you do so.
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by Typ997S » Thu Feb 21, 2019 8:05 pm

lassevirensghost wrote:
Thu Feb 21, 2019 7:48 pm
I keep seeing "it is bad for taxable" and understand the argument, but exactly how bad is bad? How much drag would it actually produce?
I'll take a shot (with numbers I've arbitrarily picked...folks can use their own.)

Let's assume $100,000 invested, and the 40% of the fund that is fixed income yields 3.5% in dividends. That gives you $1400 of taxable dividends a year. Let's assume our investor is in a 22% Federal and 5% state bracket - that means $378 a year owed in taxes. If we look at it like an expense ratio, that's a 0.38% drag. If we look at it as a percentage of return, assuming a total return of 8% ($8000) per year, it's a loss of 4.7% of return to taxes.

Looked at this way, on a one year basis, the inefficiency is pretty small, but it will add up when compounded over many years.

As a good Boglehead, I've got my assets placed separately, because I want every ounce of performance I can get. However, I've told my wife that if anything happens to me, just stick everything in VSMGX. The simplicity will be worth the loss of inefficiency. (Plus most of my assets are in tax advantaged spaced anyway. :mrgreen: )

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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by lassevirensghost » Fri Feb 22, 2019 9:35 am

Typ997S wrote:
Thu Feb 21, 2019 8:05 pm
lassevirensghost wrote:
Thu Feb 21, 2019 7:48 pm
I keep seeing "it is bad for taxable" and understand the argument, but exactly how bad is bad? How much drag would it actually produce?
I'll take a shot (with numbers I've arbitrarily picked...folks can use their own.)

Let's assume $100,000 invested, and the 40% of the fund that is fixed income yields 3.5% in dividends. That gives you $1400 of taxable dividends a year. Let's assume our investor is in a 22% Federal and 5% state bracket - that means $378 a year owed in taxes. If we look at it like an expense ratio, that's a 0.38% drag. If we look at it as a percentage of return, assuming a total return of 8% ($8000) per year, it's a loss of 4.7% of return to taxes.

Looked at this way, on a one year basis, the inefficiency is pretty small, but it will add up when compounded over many years.

As a good Boglehead, I've got my assets placed separately, because I want every ounce of performance I can get. However, I've told my wife that if anything happens to me, just stick everything in VSMGX. The simplicity will be worth the loss of inefficiency. (Plus most of my assets are in tax advantaged spaced anyway. :mrgreen: )
Thank you so much for this. This is the clearest I've seen it laid out!

I plan to have most of my assets in tax-advantaged space and am aiming to hit $1M by my early 50s. Currently 31yo. I can't imagine having much more than $200K in taxable and would love to just have it all in VSMGX. (I have really nothing in taxable right now.) I don't want to do future me a disservice, but it seems ridiculously optimistic to imagine much more money than that in taxable. And I suppose if money started really flowing into accounts, I could just quit using LS and start allocating things to more tax-efficient funds, perhaps slowly going away from LS or just leaving it be at a low-enough amount, yeah? Maybe once you get above $50K in taxable you think about some other options.
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by watchman1675 » Fri Aug 09, 2019 9:56 pm

The ideal VSMGX Portfolio composition tweaked for me would be

Vanguard Total Stock Market Index Fund Investor Shares 40.00%
Vanguard Total Bond Market II Index Fund Investor Shares† 27.00%
Vanguard Total International Stock Index Fund Investor Shares 20.00%
Vanguard Total International Bond Index Fund 13.00%
100.00%

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Re: Super Lazy portfolio, just VSMGX?

Post by smectym » Sat Aug 10, 2019 12:04 am

livesoft wrote:
Thu Feb 21, 2019 3:39 pm
phxjcc wrote:
Thu Feb 21, 2019 3:18 pm
Sooooo, is there a CA muni fund version of this? :beer
I don't live in a state with state income taxes, so I have not explored this. There is the Vanguard Tax-managed Balanced fund VTMFX which is most of the way there. I would not use it.
What’s wrong with VTMFX, I use it heavily.

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Re: Super Lazy portfolio, just VSMGX?

Post by livesoft » Sat Aug 10, 2019 5:52 am

smectym wrote:
Sat Aug 10, 2019 12:04 am
What’s wrong with VTMFX, I use it heavily.
It is wrong for me because it would be a balanced fund in a taxable account. I know how to tax-loss harvest and I am in a low enough tax bracket in a no-income-tax state, so that I don't pay taxes on long-term capital gains nor on qualified dividends. I don't want to own nor need to own tax-exempt muni bonds in any form.

In short: There are much better funds for me for the money I have in a taxable account.
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Re: Super Lazy portfolio, just VSMGX?

Post by unclescrooge » Sat Aug 10, 2019 2:21 pm

nisiprius wrote:
Thu Feb 21, 2019 3:37 pm

You know. Some people are OK using all-in-one pumpkin spice, and some take the trouble of using separate spices because they like cinnamon and dislike nutmeg.
That's a really good analogy. 👍

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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by Sandtrap » Sat Aug 10, 2019 2:42 pm

One of the best advantages of a “fund of funds” or “balanced fund” are behavioral. No tweaking. Etc.
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by longinvest » Sat Aug 10, 2019 3:39 pm

phxjcc wrote:
Thu Feb 21, 2019 1:41 pm
Ok gang, tell me why not.

It is a fund of the funds that everyone here recommends.

No balancing worries, just sell when you need money.
Go for it! :thumbsup

About tax efficiency, here's what I wrote in another thread:
longinvest wrote:
Sat Aug 03, 2019 9:04 am
I haven't yet seen any proof of a clear advantage to using anything more complex than holding a single identical all-in-one globally-diversified balanced index fund or ETF like a Vanguard LifeStrategy or Target Retirement fund, or an iShares Core Allocation ETF in all accounts (Traditional, Roth, ..., and even taxable).

I think that most tax-efficient fund placement arguments are flawed because they ignore tax-adjusted asset allocation which is justified by mathematics:
Bogleheads wiki wrote:Your ability to take risk is determined by the consequences of losses; losing $100K in your Roth IRA will reduce your standard of living (or require more additional savings to keep the same standard) by more than losing $100K in your traditional IRA or taxable account does.
In particular:
  • Most analyses ignore the long-term impact of asset location. For example, while bonds get most of their growth from coupons which attract immediate taxes, unlike stock capital gains which are only taxed when realized often decades later (leading simple analyses to conclude that one should prioritize bonds over stocks in tax-advantaged accounts), a long-term view can reveal that the generally faster growth of stocks might lead to more taxes when stock dividends in taxable grow to more than bond interest in tax-advantaged. Also, prioritizing the placement of a slower growing asset in tax-advantaged leads to a slower growth of tax-advantaged space relative to the size of the entire portfolio.
  • Most analyses ignore that rebalancing reduces the impact (good or bad) of prioritizing the location of specific assets into specific accounts.
  • Most analyses ignore the tax advantage of rebalancing with the cash flows of other investors when using a balanced fund or ETF in a taxable account.
  • Most analyses ignore that future tax laws could change, that future investor circumstances could change, and that the best asset location strategy can only be known after the fact.
I think that using a mirrored asset allocation in all accounts with a single identical all-in-one fund or ETF is good enough and elegantly sidesteps the need to tax-adjust the asset allocation.* The use of a single fund or ETF significantly simplifies the portfolio for a surviving spouse or caretakers and can help the investor avoid a long list of behavioral pitfalls.

* A mirrored asset allocation is inherently tax-adjusted.

Many investors are likely to lose more to behavioral pitfalls with separate funds or ETFs than to save in taxes even when they're lucky enough to select an asset location strategy that beats the mirrored one (unforeseeable) in their specific long-term investing time frame.
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by CurlyDave » Sat Aug 10, 2019 3:53 pm

Is it really a "fund of funds", or do they just buy the underlying shares in the correct proportions?

The fund of funds idea has been around for a long time and its downfall is that you are stacking fees on top of fees.

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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by willthrill81 » Sat Aug 10, 2019 4:00 pm

CurlyDave wrote:
Sat Aug 10, 2019 3:53 pm
Is it really a "fund of funds", or do they just buy the underlying shares in the correct proportions?
It doesn't make a difference apart from the expense ratios. Yes, such funds often have ridiculously higher ERs than the weighted-average ER of the funds that they are made of, but this isn't always the case. This fund is charging about 7 basis points more than the weighted-average ER of the funds it holds. The behavioral advantages alone could easily be worth that much, never mind the effort of rebalancing. But in a taxable account, there are potentially significant reasons to favor a DIY approach, such as tax-loss or tax-gain harvesting.
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by retiredjg » Sat Aug 10, 2019 4:09 pm

CurlyDave wrote:
Sat Aug 10, 2019 3:53 pm
Is it really a "fund of funds", or do they just buy the underlying shares in the correct proportions?

The fund of funds idea has been around for a long time and its downfall is that you are stacking fees on top of fees.
It is a fund of funds. But no, they do not stack fees on funds like this at Vanguard.

The ER should be the same as the weighted average. I suspect the 7 basis points mentioned by willthrill is probably rounding error. Even if it is an add on fee (which I doubt) that is little to pay for the convenience.

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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by willthrill81 » Sat Aug 10, 2019 4:16 pm

retiredjg wrote:
Sat Aug 10, 2019 4:09 pm
CurlyDave wrote:
Sat Aug 10, 2019 3:53 pm
Is it really a "fund of funds", or do they just buy the underlying shares in the correct proportions?

The fund of funds idea has been around for a long time and its downfall is that you are stacking fees on top of fees.
It is a fund of funds. But no, they do not stack fees on funds like this at Vanguard.

The ER should be the same as the weighted average. I suspect the 7 basis points mentioned by willthrill is probably rounding error. Even if it is an add on fee (which I doubt) that is little to pay for the convenience.
The ER probably was the same as the weighted average of the funds if investor shares were owned. But all four of the funds that comprise VSMGX are now available as admiral shares with a lower ER; the investor shares of all four funds are actually closed to new investors, and with obvious good reason. The weighted average ER of the admiral share funds is 6.8 basis points, so the premium paid for this fund is currently 6.2 basis points.
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by retiredjg » Sat Aug 10, 2019 4:23 pm

willthrill81 wrote:
Sat Aug 10, 2019 4:16 pm
retiredjg wrote:
Sat Aug 10, 2019 4:09 pm
CurlyDave wrote:
Sat Aug 10, 2019 3:53 pm
Is it really a "fund of funds", or do they just buy the underlying shares in the correct proportions?

The fund of funds idea has been around for a long time and its downfall is that you are stacking fees on top of fees.
It is a fund of funds. But no, they do not stack fees on funds like this at Vanguard.

The ER should be the same as the weighted average. I suspect the 7 basis points mentioned by willthrill is probably rounding error. Even if it is an add on fee (which I doubt) that is little to pay for the convenience.
The ER probably was the same as the weighted average of the funds if investor shares were owned. But all four of the funds that comprise VSMGX are now available as admiral shares with a lower ER; the investor shares of all four funds are actually closed to new investors, and with obvious good reason. The weighted average ER of the admiral share funds is 6.8 basis points, so the premium paid for this fund is currently 6.2 basis points.
That may be true, but the funds that make up the LifeStrategy fund are all still investor shares unless the Vanguard site is out of date. So no "add on" even though it is a little more expensive than if you made your own fake LifeStragety fund out of individual funds with Admiral shares.

I believe the poster is referring to funds that do have an add-on to the underlying fund expense ratios. I have heard that such things exist. That is not the case here.

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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by willthrill81 » Sat Aug 10, 2019 4:27 pm

retiredjg wrote:
Sat Aug 10, 2019 4:23 pm
willthrill81 wrote:
Sat Aug 10, 2019 4:16 pm
retiredjg wrote:
Sat Aug 10, 2019 4:09 pm
CurlyDave wrote:
Sat Aug 10, 2019 3:53 pm
Is it really a "fund of funds", or do they just buy the underlying shares in the correct proportions?

The fund of funds idea has been around for a long time and its downfall is that you are stacking fees on top of fees.
It is a fund of funds. But no, they do not stack fees on funds like this at Vanguard.

The ER should be the same as the weighted average. I suspect the 7 basis points mentioned by willthrill is probably rounding error. Even if it is an add on fee (which I doubt) that is little to pay for the convenience.
The ER probably was the same as the weighted average of the funds if investor shares were owned. But all four of the funds that comprise VSMGX are now available as admiral shares with a lower ER; the investor shares of all four funds are actually closed to new investors, and with obvious good reason. The weighted average ER of the admiral share funds is 6.8 basis points, so the premium paid for this fund is currently 6.2 basis points.
That may be true, but the funds that make up the LifeStrategy fund are all still investor shares unless the Vanguard site is out of date. So no "add on" even though it is a little more expensive than if you made your own fake LifeStragety fund out of individual funds with Admiral shares.

I believe the poster is referring to funds that do have an add-on to the underlying fund expense ratios. That is not the case here.
I see your point, but it's not the relevant mode of comparison in CurlyDave's concern. A new investor cannot buy the investor shares of these funds any more, nor should they want to if they could. Why should I care what the ER is for the funds that Vanguard is using when I can access the very same fund on my own at a significantly lower ER? Are you suggesting that there is a difference between the investor and admiral shares beyond their ERs?

The correct comparison here is what an investor is paying for this fund of funds vs. buying the same funds on their own.
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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by retiredjg » Sat Aug 10, 2019 5:12 pm

willthrill81 wrote:
Sat Aug 10, 2019 4:27 pm
I see your point, but it's not the relevant mode of comparison in CurlyDave's concern. A new investor cannot buy the investor shares of these funds any more, nor should they want to if they could. Why should I care what the ER is for the funds that Vanguard is using when I can access the very same fund on my own at a significantly lower ER? Are you suggesting that there is a difference between the investor and admiral shares beyond their ERs?

The correct comparison here is what an investor is paying for this fund of funds vs. buying the same funds on their own.
I think that is a correct comparison if you are just looking at cost, but that is not what CurlyDave is talking about.

It has been said here that some "funds of funds" charge not only the underlying ERs of the funds but also an additional ER just for packaging the funds inside another fund - i.e. stacking fees (ERs) on top of fees (ERs). That is not what is happening with this fund.

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Re: Super Lazy portfolio, just VSMGX? [Vanguard LifeStrategy Moderate Growth]

Post by willthrill81 » Sat Aug 10, 2019 5:14 pm

retiredjg wrote:
Sat Aug 10, 2019 5:12 pm
It has been said here that some "funds of funds" charge not only the underlying ERs of the funds but also an additional ER just for packaging the funds inside another fund - i.e. stacking fees (ERs) on top of fees (ERs). That is not what is happening with this fund.
On that point we mostly agree. Vanguard is not directly charging a 'stacked fee', but you could DIY using the same funds yourself for a significantly lower total ER, so it seems to be a distinction without a difference, IMHO.

It is unfortunate that Vanguard hasn't yet updated these funds by replacing the investor shares with admiral shares and lowering the ER accordingly.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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