Expense ratios Life Strategy Mod. vs. individual holdings

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Topic Author
RobLIC
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Expense ratios Life Strategy Mod. vs. individual holdings

Post by RobLIC » Mon May 13, 2019 9:12 am

Morning, all.

ER on Life Strategy Moderate Growth (VSMGX) is .13. If you hold the four funds individually at the identical weights, it’s .07.

Where do some of you draw the line on thrift vs. the convenience of not rebalancing? Am I correct that this works out to a difference of $60 saved per $100,000 a year if you hold the four index funds on their own?

I realize there are tax/future RMD benefits to holding the individual funds, if you’re spread across an IRA and a taxable account.

Thanks,
RobLIC

furwut
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by furwut » Mon May 13, 2019 9:31 am

Here’s Mike Piper on All In One Funds.
If we’re assuming there’s no difference in original allocation (i.e., the person would start off holding either the LifeStrategy fund or an identical allocation via individual index funds), then the upside of an all-in-one fund is that it’s easier to stick with the allocation plan.

RadAudit
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by RadAudit » Mon May 13, 2019 9:38 am

RobLIC wrote:
Mon May 13, 2019 9:12 am
Where do some of you draw the line on thrift vs. the convenience of not rebalancing? Am I correct that this works out to a difference of $60 saved per $100,000 a year if you hold the four index funds on their own?
As I get farther and farther in to the RMD thicket, the line where thrift wins out over convenience is getting to be a lot higher than $60 / $100,000. Or, as some say, I've had bigger bar bills.
FI is the best revenge. LBYM. Invest the rest. Stay the course. - PS: The cavalry isn't coming, kids. You are on your own.

Leroy Jones
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by Leroy Jones » Mon May 13, 2019 10:03 am

I've had my IRA in Life Strategy Moderate since I moved to Vanguard from TRP, about six years. I like the ease of use in this fund. Yes I pay a little more expense ratio, but the ease of using this fund out ways the hassle of dealing with rebalancing and setting up my own allocation. Also easy to make withdrawals from.
Leroy Jones :sharebeer

mpnret
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by mpnret » Mon May 13, 2019 10:03 am

All depends on how much you have and how important tax efficiency is to you.

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vineviz
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by vineviz » Mon May 13, 2019 10:16 am

RobLIC wrote:
Mon May 13, 2019 9:12 am
Morning, all.

ER on Life Strategy Moderate Growth (VSMGX) is .13. If you hold the four funds individually at the identical weights, it’s .07.

Where do some of you draw the line on thrift vs. the convenience of not rebalancing? Am I correct that this works out to a difference of $60 saved per $100,000 a year if you hold the four index funds on their own?
The average 60/40 4-fund investor underperforms VSMGX by something like 85 bps per year including expenses.

Gaining 5bps in order to lose 90 bps is a fool's bargain, IMHO.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Gort
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by Gort » Mon May 13, 2019 10:22 am

Check out the following discussion concerning the same question I asked a few years ago...

viewtopic.php?f=1&t=164844&p=2475968#p2475968

(FYI I went with the individual 4 funds).

Topic Author
RobLIC
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by RobLIC » Mon May 13, 2019 8:28 pm

Thank you for replies, all.

Vineviz, not sure how difference could be so high when using identical funds?

Gort, helpful referral - identical in fact. Drives home for me that a lot of this is an exercise in how well you know your own behavior. No wrong answers. The volatility lately has made me realize that in a bear market I could be selling bonds to buy stock for my AA, which ... well, is fine, it’s just not how things have been going for some time ... but you follow the AA in your IPS and try not to tinker more than once a year. Thanks again.

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David Jay
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by David Jay » Mon May 13, 2019 9:44 pm

RobLIC wrote:
Mon May 13, 2019 8:28 pm
Vineviz, not sure how difference could be so high when using identical funds?
I am not vineviz but I know what he is referencing: Investor Behavior. Things like not rebalancing. Or rebalancing at the wrong time. Or “tweaking” your Asset Allocation.

There was a past study that showed the accounts of dead people outperforming the accounts of living people. There is a whole field of study about this, called “Behavioral Finance”.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Topic Author
RobLIC
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Re: Expense ratios Life Strategy Mod. vs. individual holdings

Post by RobLIC » Tue May 14, 2019 12:04 pm

Thanks, David. I understand. Emotional reactions can be are common and can be counter-productive, which is why I try to think about this only once a year.

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