By switching from high cost actively managed mutual funds to low cost passive mutual funds and ETFs, I have reduced my weighted expense ratio to 0.19%. The weighted expense ratio would have been 1% or more before I started this. This is thousands of dollars saved per year. I'm starting to understand how our 401k provider can afford to fly their representative halfway across the country to meet with employees.
I still have 12.3% of my portfolio in a fund that charges 0.95%, so I have some work to do still. But I am happy for the progress. I have no one who wants to hear this in my life, but I thought someone here would celebrate with me.
Our company initially offered its employees a 401k plan about 30 years ago. Like most young, ignorant-of-investing-principles workers, I took someone's recommendation for investment options, then thought no more about it. A few years ago, our company moved our plan to Fidelity, at which time my account was distributed among what they claimed were the "closest" matches to the existing elections:
20% - Spartan 500 Index Fund (0.05% ER)
30% - Spartan Extended Market Index Fund (0.07% ER)
20% - Dodge & Cox Stock Fund (0.52% ER, 15% turnover)
30% - Fidelity Growth Company Fund (0.77% ER)
No international, no bonds.
Since then, I've endeavored to educate myself (in large part through the resources available here and through several great books) and now am well diversified in inexpensive index funds, with the highest ER in my portfolio being 0.12% (MSCI ACWI exUS-tracking index fund). I've also learned to distinguish between such options as Spartan U.S. Bond Index Fund (0.07% ER, 75% turnover) versus PIMCO Total Return Fund (0.46% ER, 265% turnover).
Thanks, Bogleheads; and thanks as well to Mr. Larimore, Mr. Swedroe, Mr. Bernstein, Mr. Ferri, Mr. Merriman, and (of course) Mr. Bogle.
whodidntante wrote:I'm starting to understand how our 401k provider can afford to fly their representative halfway across the country to meet with employees.
Do you ever wonder who pays for the lavish Super Bowl parties that the brokers throw? Do you ever wonder who pays for the lavish trips to Las Vegas for brokers and bankers? Do you ever wonder who pays for the lavish dinners at the ritzy restaurants when the brokers dine there? You did. But no more....
Be sure you understand how those numbers were created, which is cited under the image. Expense ratios "Notes 1"
For those who don't want to do the detailed calculations, the Financial Industry Regulatory Authority, Inc (About FINRA | FINRA.org) has a calculator that lets you compare funds directly.
down to a weighted average of 10 basis points. It would be much less, except wife's 403b administrator only offers investor, not admiral or institutional shares of Total Bond Index. A 'brutal' 20 basis points at the investor level is killing my average.
Congrats! I've been slowly shifting from actively managed funds to low ER similar funds. Don't forget about how you aren't paying for all their advertising and brick and mortar anymore
"The greatest enemies of the equity investor are expenses and emotions." -John C. Bogle, Little Book of Common Sense Investing. |
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"Winter is coming." Lord Eddard Stark.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
