What is the highest expense ratio you willingly pay?

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Independent George
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Re: What is the highest expense ratio you willingly pay?

Post by Independent George » Tue Feb 11, 2020 10:47 pm

GoFish wrote:
Mon Feb 10, 2020 2:22 am
Until I learn differently, I will continue to think paying for active management in bond funds makes sense. I have significant positions in these active funds in my FIDO TIRA:
  • FTBFX (45 bp, 10% of portfolio)
  • PIMIX (105 bp, 6%)
  • BCOIX (30 bp, 9%)
Along with SHY (15 bp, 9%) those active funds make up the bulk of my fixed income investments.

To respond to the OP, PIMIX is my most expensive fund at 1.05%. I could choose any fund FIDO offers, so I guess I have volunteered for an expense ratio over 1% :annoyed

But PIMIX has significantly outperformed my other fixed income holdings, so I’m not anxious to unload it.

I have back tested each of the active funds against VBTLX (5 bp). With only the exception of the last 12 months where PIMIX has lagged slightly, each of the active funds has outperformed VBTLX over 1, 3, 5, and 10 years.

I don’t get the BH preference for index funds for fixed income. But I’m here to learn.
Though passive bond funds still tend to do better than active, that is not true across the board. Around 30% of active short & intermediate corporate bond funds, and almost 40% of international bond funds, beat their respective indices over the last 15 years (and the scorecard does not say by what margins). I don't know enough to say why that is, nor can I say which funds will continue to do so in the future, but there does seem to be noticeable alpha in bond markets, and those sectors in particular.

That said, I still own passive bond funds because even if managers are able to pick bonds, I am not confident in my ability to pick managers.

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grabiner
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Re: What is the highest expense ratio you willingly pay?

Post by grabiner » Tue Feb 11, 2020 11:42 pm

Independent George wrote:
Tue Feb 11, 2020 10:47 pm
Though passive bond funds still tend to do better than active, that is not true across the board. Around 30% of active short & intermediate corporate bond funds, and almost 40% of international bond funds, beat their respective indices over the last 15 years (and the scorecard does not say by what margins). I don't know enough to say why that is, nor can I say which funds will continue to do so in the future, but there does seem to be noticeable alpha in bond markets, and those sectors in particular.
The reason is that the index is not representative of the class. Bond indexes have more Treasuries than most "corporate" bond funds; therefore, they hold lower-yielding bonds with less risk. Conversely, corporate-only indexes such as Vanguard's VCSH, VCIT, and VCLT hold higher-yielding bonds with more risk than most active investment-grade funds, so they will usually outperform the active funds even before expenses.
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manuvns
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Re: What is the highest expense ratio you willingly pay?

Post by manuvns » Wed Feb 12, 2020 12:34 am

TIAA real estate fund has 0.83% expense , do you think it is worth paying ?

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grabiner
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Re: What is the highest expense ratio you willingly pay?

Post by grabiner » Wed Feb 12, 2020 9:19 pm

manuvns wrote:
Wed Feb 12, 2020 12:34 am
TIAA real estate fund has 0.83% expense , do you think it is worth paying ?
Yes, because this is not the same kind of expense. A large part of this expense is the expense of managing the real estate which the fund holds. All real estate investments have this type of expense, but only TIAA reports it directly. If you buy a REIT mutual fund, the reported expense includes only the expenses of operating the fund; expenses paid by the underlying REITs, which do affect their returns, are not included.
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lexor
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Re: What is the highest expense ratio you willingly pay?

Post by lexor » Wed Feb 12, 2020 9:23 pm

grabiner wrote:
Wed Feb 12, 2020 9:19 pm
manuvns wrote:
Wed Feb 12, 2020 12:34 am
TIAA real estate fund has 0.83% expense , do you think it is worth paying ?
Yes, because this is not the same kind of expense. A large part of this expense is the expense of managing the real estate which the fund holds. All real estate investments have this type of expense, but only TIAA reports it directly. If you buy a REIT mutual fund, the reported expense includes only the expenses of operating the fund; expenses paid by the underlying REITs, which do affect their returns, are not included.
Would the underlying management costs be in the prospectus of other REIT funds?
“The miracle of compounding returns is overwhelmed by the tyranny of compounding costs.” -Mr. John C. Bogle

Gemini
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Re: What is the highest expense ratio you willingly pay?

Post by Gemini » Wed Feb 12, 2020 9:24 pm

5 and 56/44 if I could get into Medallion

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grabiner
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Re: What is the highest expense ratio you willingly pay?

Post by grabiner » Wed Feb 12, 2020 9:25 pm

lexor wrote:
Wed Feb 12, 2020 9:23 pm
grabiner wrote:
Wed Feb 12, 2020 9:19 pm
manuvns wrote:
Wed Feb 12, 2020 12:34 am
TIAA real estate fund has 0.83% expense , do you think it is worth paying ?
Yes, because this is not the same kind of expense. A large part of this expense is the expense of managing the real estate which the fund holds. All real estate investments have this type of expense, but only TIAA reports it directly. If you buy a REIT mutual fund, the reported expense includes only the expenses of operating the fund; expenses paid by the underlying REITs, which do affect their returns, are not included.
Would the underlying management costs be in the prospectus of other REIT funds?
No, but you might find them in the prospectus of the individual REITs that the fund holds (and likewise in the financial statements of other corporations which issue stock).
Wiki David Grabiner

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oldzey
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Re: What is the highest expense ratio you willingly pay?

Post by oldzey » Wed Feb 12, 2020 9:25 pm

manuvns wrote:
Wed Feb 12, 2020 12:34 am
TIAA real estate fund has 0.83% expense , do you think it is worth paying ?
Yes. It is essentially a low cost private equity fund with a liquidity guarantee.

A question for you - what is the expense ratio of TIAA Traditional?
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

Starfish
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Re: What is the highest expense ratio you willingly pay?

Post by Starfish » Wed Feb 12, 2020 9:27 pm

Gemini wrote:
Wed Feb 12, 2020 9:24 pm
5 and 56/44 if I could get into Medallion
I was just going to write he same.
Shut up and take my money!

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DartThrower
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Re: What is the highest expense ratio you willingly pay?

Post by DartThrower » Thu Feb 13, 2020 7:33 am

My highest currently is VANGUARD FTSE EMERGING MARKETS ETF (VWO) at 12 bp. Overall portfolio cost is 7 bp and there it will stay.
A Boglehead can stay the course longer than the market can stay irrational.

robphoto
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Re: What is the highest expense ratio you willingly pay?

Post by robphoto » Thu Feb 13, 2020 8:44 am

VPMAX PRIMECAP at .31, a sentimental favorite.

JBTX
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Re: What is the highest expense ratio you willingly pay?

Post by JBTX » Thu Feb 13, 2020 10:11 am

Fidelity contrafund 0.8%
Fidelity low price stock 0.52
PIMCO commodity real return 0.7
Fidelity emerging markets 0.9

Theoretical
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Re: What is the highest expense ratio you willingly pay?

Post by Theoretical » Fri Feb 14, 2020 1:08 am

lexor wrote:
Mon Feb 10, 2020 9:44 am
Theoretical wrote:
Mon Feb 10, 2020 1:20 am
MFTNX is a managed futures fund. It's not a bear market fund. It can and has made a whole lot of money in good years as well as bad ones.

It's trend-following (aka time-series momentum) across stock index futures, interest rate futures, currencies, and commodities futures. It also has a 5% slug of trading the VIX (fear index) that's distinct from trends. It has 53 assets invested. The investment is done via futures.

It uses multiple timing signals (up or down) for periods measured in the weeks to months for each asset. These include entry and exit signals, with a bias towards a gradual increase in positions as signals get stronger but a quick(er) exit if the signal changes.

Skewness relates to the distribution of the returns, where most of the returns for stocks are positive with a few bloodbaths (1929, 2008). Trend-following is the opposite, where the majority of the trades are small losers but the big winners are huge. These can happen in good and bad years for the stock market. For example, it did quite well in 2017 and 2019 (19.3 and 15.77%) while being down in 2018 (-19.44%.)

The reason I say it's systematic is that all trades are ordered by the computerized systems based on reaching specific timing/trend signals without discretionary overrides. While they set timing signals up, they do not attempt to discern what the market will do (I've listened to a lot of interviews with the traders from this and other funds). It's simply a question of following the system and getting out if the trade ends up going against you.

The average volatility of returns being targeted by the fund is ~23%, so it's had some hellaciously bad spots (February 2018 is a great example).

The fees are legitimately terrible, with a mutual fund ER of 1.23 on top of a 0 ER + 25% performance fee for the underlying fund.

It's consistently uncorrelated with the S&P, and even less correlated with Value stocks. For bonds it's moderately correlated to them while rates have fallen or been flat. At a 20-25% volatility, it means 5-10% has a much greater impact on the returns of the portfolio than something with 8-10% volatility. This is especially done because I have limited tax-deferred/exempt space. If there was cheaper exposure to a high volatility fund than this, I'd gladly go for it.

https://mebfaber.com/2019/02/27/episode ... pt-or-die/ - Marty Bergin is the CEO of Dunn and this provides a good summary.

Something I cannot emphasize enough is the following: Do not invest in even milder funds until you have a good idea about what makes these things tick. I spent many hours scouring prospecti and papers, and listening to podcasts about these types of funds before I put even a 5% smidge in. While these funds make a good alternative for MY FAMILY'S portfolio, there's a ton of risk here, especially because the mutual fund era has not been great at all for these types of funds. I could well end up forgoing a lot of gains if the assets were in bonds or stocks.
It doesn't seem to have performed well for any extended period. It's pretty flat since 2013 https://www.portfoliovisualizer.com/bac ... ion2_2=100

However, perhaps that is due to the unusual bull market we have experienced. Thanks for sharing the ideas behind it.
I forgot to note, the fund adopted the Dunn strategy on 10/1/2015 from a previous Managed Futures strategy. The returns have been extremely up and down.

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whodidntante
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Re: What is the highest expense ratio you willingly pay?

Post by whodidntante » Fri Feb 14, 2020 1:18 am

Pegasus_RPG wrote:
Fri Feb 07, 2020 4:14 pm
Franklin Corefolio Allocation R6 (FTLQX) @ 0.66%.
I nominate this for worst fund name. Although it did make me think of Beavis and Butthead for an instant.

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peterinjapan
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Re: What is the highest expense ratio you willingly pay?

Post by peterinjapan » Sat Feb 15, 2020 12:23 am

I pay 0.6% for XOUT, an ETF that takes the S&P 500 and "crosses out" the "worst" 250 companies, according to their criteria. So far it's been well worth it though it's a new fund so time will tell.

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Bluce
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Re: What is the highest expense ratio you willingly pay?

Post by Bluce » Sat Feb 15, 2020 12:49 am

MotoTrojan wrote:
Thu Feb 06, 2020 11:59 pm
Curious to hear what other Bogleheads happily pay to get exposure to non 3-fund approved funds? Obviously some 401k's have egregious fees, but I am wondering what people will buy in their IRA or brokerage accounts where low single-digit basis-point options are aplenty.

For me it is FNDC's 40bp ER for International small-value, which I hold at 25% currently (target of 30% but difference is floated in VTIAX via 401k). I've also got about 10% in FNDX (25bp) right now which I probably feel even more questionable about, given how much cheaper options there are out there to tilt to value domestically, but I get the warm & fuzzies by the fundamental weighting approach.

Weighted portfolio ER is currently 18bp.

So, whatcha got?
I have PCI, a closed end bond fund, with a 4.63 ER. But it has an 8.25% yield.

Otherwise, most of my stuff is .0x%.

H. E. Pennypacker
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Re: What is the highest expense ratio you willingly pay?

Post by H. E. Pennypacker » Sat Feb 15, 2020 1:16 am

Fidelity Money Market Fund (SPRXX), 0.42%

I use Fidelity as a one-stop shop, and all of my cash in my cash management account sits in SPRXX. It is effectively my checking account. If you want to exclude that, it's a fund with a .25% ER that I'm stuck with my in 401(k). It you want to exclude that and include only things in my IRA, which is what I'm truly and happily willing to pay, it's 0.025%.

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alpenglow
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Re: What is the highest expense ratio you willingly pay?

Post by alpenglow » Sat Feb 15, 2020 8:48 am

H. E. Pennypacker wrote:
Sat Feb 15, 2020 1:16 am
Fidelity Money Market Fund (SPRXX), 0.42%

I use Fidelity as a one-stop shop, and all of my cash in my cash management account sits in SPRXX. It is effectively my checking account. If you want to exclude that, it's a fund with a .25% ER that I'm stuck with my in 401(k). It you want to exclude that and include only things in my IRA, which is what I'm truly and happily willing to pay, it's 0.025%.
Why is a wealthy industrialist like yourself slumming it with SPRXX? :D

H. E. Pennypacker
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Re: What is the highest expense ratio you willingly pay?

Post by H. E. Pennypacker » Sat Feb 15, 2020 9:15 am

alpenglow wrote:
Sat Feb 15, 2020 8:48 am
H. E. Pennypacker wrote:
Sat Feb 15, 2020 1:16 am
Fidelity Money Market Fund (SPRXX), 0.42%

I use Fidelity as a one-stop shop, and all of my cash in my cash management account sits in SPRXX. It is effectively my checking account. If you want to exclude that, it's a fund with a .25% ER that I'm stuck with my in 401(k). It you want to exclude that and include only things in my IRA, which is what I'm truly and happily willing to pay, it's 0.025%.
Why is a wealthy industrialist like yourself slumming it with SPRXX? :D
I’m focused more on my bicyclist ventures nowadays.

Also, what should I be using instead? It’s a checking account, I want there to be effectively zero volatility.

reln
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Re: What is the highest expense ratio you willingly pay?

Post by reln » Sat Feb 15, 2020 9:23 am

watchnerd wrote:
Fri Feb 07, 2020 7:24 am
My highest ER:

Prime Money Market fund = 0.16
Ditto

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alpenglow
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Re: What is the highest expense ratio you willingly pay?

Post by alpenglow » Sat Feb 15, 2020 10:37 am

H. E. Pennypacker wrote:
Sat Feb 15, 2020 9:15 am
alpenglow wrote:
Sat Feb 15, 2020 8:48 am
H. E. Pennypacker wrote:
Sat Feb 15, 2020 1:16 am
Fidelity Money Market Fund (SPRXX), 0.42%

I use Fidelity as a one-stop shop, and all of my cash in my cash management account sits in SPRXX. It is effectively my checking account. If you want to exclude that, it's a fund with a .25% ER that I'm stuck with my in 401(k). It you want to exclude that and include only things in my IRA, which is what I'm truly and happily willing to pay, it's 0.025%.
Why is a wealthy industrialist like yourself slumming it with SPRXX? :D
I’m focused more on my bicyclist ventures nowadays.

Also, what should I be using instead? It’s a checking account, I want there to be effectively zero volatility.
I figured a big philanthropist like yourself would be sucked in private banking and the like. I use the Fido CMA the same way.

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MotoTrojan
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Re: What is the highest expense ratio you willingly pay?

Post by MotoTrojan » Sat Feb 15, 2020 1:50 pm

peterinjapan wrote:
Sat Feb 15, 2020 12:23 am
I pay 0.6% for XOUT, an ETF that takes the S&P 500 and "crosses out" the "worst" 250 companies, according to their criteria. So far it's been well worth it though it's a new fund so time will tell.
Interesting fund (not something I would be interested in, I like to buy the value stocks); I am very curious to hear more info on their methodology. It looks like a glorified tech-tilt with an egregious ER.

https://www.graniteshares.com/Documents ... T11620.pdf

H. E. Pennypacker
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Re: What is the highest expense ratio you willingly pay?

Post by H. E. Pennypacker » Sat Feb 15, 2020 7:49 pm

alpenglow wrote:
Sat Feb 15, 2020 10:37 am
H. E. Pennypacker wrote:
Sat Feb 15, 2020 9:15 am
alpenglow wrote:
Sat Feb 15, 2020 8:48 am
H. E. Pennypacker wrote:
Sat Feb 15, 2020 1:16 am
Fidelity Money Market Fund (SPRXX), 0.42%

I use Fidelity as a one-stop shop, and all of my cash in my cash management account sits in SPRXX. It is effectively my checking account. If you want to exclude that, it's a fund with a .25% ER that I'm stuck with my in 401(k). It you want to exclude that and include only things in my IRA, which is what I'm truly and happily willing to pay, it's 0.025%.
Why is a wealthy industrialist like yourself slumming it with SPRXX? :D
I’m focused more on my bicyclist ventures nowadays.

Also, what should I be using instead? It’s a checking account, I want there to be effectively zero volatility.
I figured a big philanthropist like yourself would be sucked in private banking and the like. I use the Fido CMA the same way.
I’ve been busy watching the factory since Art Vandelay left. That’s kept me from private banking.

manuvns
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Re: What is the highest expense ratio you willingly pay?

Post by manuvns » Wed Feb 19, 2020 12:05 am

technically 0 BPS
https://www.tiaa.org/public/investment- ... r=47933637
oldzey wrote:
Wed Feb 12, 2020 9:25 pm
manuvns wrote:
Wed Feb 12, 2020 12:34 am
TIAA real estate fund has 0.83% expense , do you think it is worth paying ?
Yes. It is essentially a low cost private equity fund with a liquidity guarantee.

A question for you - what is the expense ratio of TIAA Traditional?

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