I agree that a lot of this comes down to whether an investor is DIY or wants their hand held. But there's no disputing the pure math that says that the latter is going to cost investors, probably a lot, over their lifetime. If it keeps them from panic selling and on track, then maybe it's worth it.Nate79 wrote: ↑Tue Jun 09, 2020 3:40 pmVanguard is very pro active fund. The question is can the fund manager overcome the fees with performance.willthrill81 wrote: ↑Tue Jun 09, 2020 3:21 pmBut fees have been robustly shown to not lead to higher returns. The inverse has actually been true.Nate79 wrote: ↑Tue Jun 09, 2020 3:16 pmFees should not be thought of in vacuum. Instead should look at actual fund performance because fund performance is after fees.willthrill81 wrote: ↑Tue Jun 09, 2020 2:55 pm For those that think that Dave might be right that fees aren't a big deal, look at this post on the White Coat Investor site, with a brief example below.
To Summarize our assumptions for Jack:
$10,000 tax deferred annual investment, in monthly increments
8% nominal returns while working
5% nominal returns in retirement
$60,000 withdrawn annually in retirement for spending & tax payments
Fees could be as low as 0.1% and as high as 3%
Jack works and invests from age 22 and retires at age 62
By investing $10,000 a year for 40 years, Jack can expect to amass anywhere from $1.28 million to $2.84 million, depending on fees. That’s a difference of $1.56 million dollars available at retirement. The DIY plan with 0.1% in fees grows to be 122% larger than the 3.0% fee plan.
And that’s not the half of it.
Continuing on into retirement, keeping spending constant at $60,000 a year, if Jack lives to be 100, he could have an 8-figure portfolio with the lowest fee structure. Or he could be out of money before his 90th birthday. If he survives to age 102, the difference between 0.1% fees and 3.0% fees exceeds $13 million!
As Bogle correctly pointed out, in the investment world, you get what you don't pay for.
The investor paying 2% in combined AUM fees, front-end loads, and expense ratios is going to be 1.9% behind the investor paying .1% in expense ratios and nothing else.
Loads, AUM, or fixed fee is how you pay your advisor. This should be a separate discussion than expense ratios. There are good advisors out there (Rick Ferri for example) and they don't work for free. Their time, advise, planning, tax advice, etc whatever they are doing costs and it costs a lot.
I wish I understood why you're so pro-Ramsey. You seem to be very quick to defend everything that he says, even when the math isn't on his side.