Buy fewer expensive funds or more of cheaper?

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jen25w
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Buy fewer expensive funds or more of cheaper?

Post by jen25w »

I know this isn't a simple question and depends on the funds but I'm confused about what's better to buy between these two mutual funds. My goal is to stay invested in one for 15-20 years. My confusion is, should I buy less of an expensive fund or more of a cheaper fund.

Blue Chip (FBGRX) $220+ a share
Contrafund (FCNTX) $21+ a share

Both funds are actively managed, able to weather the Market cycles, have strong management and solid return rates. The expenses in both are decent but I think FBGRX is more. Contra is less risky than the Blue Chip.

Also I’m already invested in FXAIX ($30k), $3500 in FBGRX, $750 in bitcoin, and bought $2300 of Nvidia on the dip. I have $7k more to invest and plan to do so in FBGRX or FCNTX.

Please help me see how one or the other is better when the share prices are so vastly different. Thanks 🙏🏼
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Re: Buy fewer expensive funds or more of cheaper?

Post by jebmke »

Share price is totally irrelevant
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Katietsu
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Re: Buy fewer expensive funds or more of cheaper?

Post by Katietsu »

I do not mean to sound snarky, but I do not think you should be investing in either of you feel that the difference in share price is an important factor.

The most cited portfolio on this forum is the three fund portfolio consisting of a US total stock index fund, an ex-US total stock index fund and a total bond fund. If you wish to deviate from this portfolio, you want to have a solid understanding of why and a solid commitment to stick to it for the long haul. Full disclosure, I am pretty sure that in the 90’s I owned most of the actively managed funds that you mentioned. None of them are bad choices. However, the more I learned, the more I moved away from those type of funds.
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dogagility
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Re: Buy fewer expensive funds or more of cheaper?

Post by dogagility »

Cost when you buy doesn't matter.
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Re: Buy fewer expensive funds or more of cheaper?

Post by sailaway »

Share price is irrelevant. Two different SP 500 funds could have their prices set very differently, but then they will perform very similarly going forward.

The two options you list are very different investments. How did you narrow down to those two? What are you trying to achieve here?
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Re: Buy fewer expensive funds or more of cheaper?

Post by hnd »

Katietsu wrote: Wed Jan 29, 2025 7:33 pm I do not mean to sound snarky, but I do not think you should be investing in either of you feel that the difference in share price is an important factor.
this. a few notes.

both are large growth funds.

fbgrx used to be mediocre (compared to its category index) until about 2012. from 2012 on, cumulatively, its destroyed its category.
fcntx used to be a destroyer of worlds. until about 2012. from 2012 on, cumulatively, its not beaten its category index.

what will either of them do in the future? who knows. will danoff is like upper 60's. Sanu Kalra is in his upper 50's. also keep in mind that FBGRX is non diversified and if you thought the sp500 was concentrated, 60% of its portfolio is in the top 10 stocks

If one was going to pick large growth active, blue chip growth is probably one I'd choose but i don't have the risk appetite at this point.
tibbitts
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Re: Buy fewer expensive funds or more of cheaper?

Post by tibbitts »

As others have said share price is totally irrelevant.
itnetpro
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Re: Buy fewer expensive funds or more of cheaper?

Post by itnetpro »

jen25w wrote: Wed Jan 29, 2025 7:22 pm I know this isn't a simple question and depends on the funds but I'm confused about what's better to buy between these two mutual funds. My goal is to stay invested in one for 15-20 years. My confusion is, should I buy less of an expensive fund or more of a cheaper fund.

Blue Chip (FBGRX) $220+ a share
Contrafund (FCNTX) $21+ a share

Both funds are actively managed, able to weather the Market cycles, have strong management and solid return rates. The expenses in both are decent but I think FBGRX is more. Contra is less risky than the Blue Chip.

Also I’m already invested in FXAIX ($30k), $3500 in FBGRX, $750 in bitcoin, and bought $2300 of Nvidia on the dip. I have $7k more to invest and plan to do so in FBGRX or FCNTX.

Please help me see how one or the other is better when the share prices are so vastly different. Thanks 🙏🏼
Im an active fund investor myself. I have strong opinions as to why I choose them.

However, you do realize, you just posted this on a Bogle Head index holy site right?

These folks hate actively traded funds and won’t take kindly to you disrespecting their faith in Indexs.

When I enter these hollowed halls, I do so respectfully.

You are on your own my friend…

FYI, was a huge Contra fan in the 2000s. Blew away index’s (when I owned it) and helped retire us at 52. It’s one that will always hold a special place in my heart. Too aggressive for me now in retirement.

Time for me to step out…

Good luck!

John
Last edited by itnetpro on Thu Jan 30, 2025 9:39 am, edited 3 times in total.
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Re: Buy fewer expensive funds or more of cheaper?

Post by steadyosmosis »

(reply removed)
Last edited by steadyosmosis on Thu Jan 30, 2025 8:55 pm, edited 1 time in total.
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SnowBog
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Re: Buy fewer expensive funds or more of cheaper?

Post by SnowBog »

OP - would you rather have 10 - $20 bills or 2 - $100 bills?

You might have a personal preference for one, but financially they are exactly the same.

But my personal advice is buy neither... Instead, read the following:
delamer
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Re: Buy fewer expensive funds or more of cheaper?

Post by delamer »

You are succumbing to their hype if you believe they can “weather the market cycles.”

The way to weather market cycles is to buy and hold your pre-determined asset allocation of low-cost index funds over the long-term.
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SnowBog
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Re: Buy fewer expensive funds or more of cheaper?

Post by SnowBog »

itnetpro wrote: Wed Jan 29, 2025 9:14 pm Im an active fund investor myself. I have strong opinions as to why I choose them.

However, you do realize, you just posted this on a Bogle Head index holy site right?

These folks hate actively traded funds and won’t take kindly to you disrespecting their faith in Indexs.

When I enter these hollowed halls, I do so respectfully.

You are on your own my friend…
Yes, a person should probably realize (or quickly find out) that those who understand and follow the Boglehead Investment Philosophy are going to strongly recommend boring, simple, low cost, broadly diversified index funds. https://www.bogleheads.org/wiki/Boglehe ... philosophy

And the most common portfolio recommendation will be the Three Fund Portfolio (or perhaps it's one-fund cousin).

But Faith?? Holy site?? That's a bit much...

One of my favorite quotes from Bogle, specifically about the Three Fund Portfolio, was something to the effect of "[The Three Fund Portfolio] may not be the best investment portfolio, but it's better than an infinite number of alternatives."

If anyone is acting on "faith", it's those who think they can "pick stocks", or believe in others who claim they can (such as is the case in active funds). Maybe they'll get lucky... Sounds like you believe you got lucky... Most likely, the boring old index approach is going to win... The data for the benefits of investing is compelling... (Highly recommend reading the items I linked in my prior post...)

But arguably, more important than what your portfolio is, would be the other key items like "live below your means", "develop a workable plan", "never bear too much or too little risk", "invest early and often". Someone who starts saving early, saves 15% (or more) of their income, doesn't panic sell or attempt to "chase" the market, will likely come out just fine.

Statistically, they'll likely come out even better had they followed the Bogleheads approach all along. But that isn't always reality... Myself, I was financially ignorant before I found BH in my early 40's. I made a lot of "mistakes" along the way. But we prioritized saving early on, blindly plowed our money into whatever fund(s) looked best at the time (probably all of them "active" over the years), and just keep doing so year after year never panicking or trying to chase things. After finding BH, realizing the wisdom of its Investment Philosophy, and realizing how much better things could be for us following such an approach, things have gotten better - and I have far more confidence about how they'll continue to progress. A high savings rate from an early age can make up for a lot of mistakes...
itnetpro
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Re: Buy fewer expensive funds or more of cheaper?

Post by itnetpro »

jen25w wrote: Wed Jan 29, 2025 7:22 pm I know this isn't a simple question and depends on the funds but I'm confused about what's better to buy between these two mutual funds. My goal is to stay invested in one for 15-20 years. My confusion is, should I buy less of an expensive fund or more of a cheaper fund.

Blue Chip (FBGRX) $220+ a share
Contrafund (FCNTX) $21+ a share

Both funds are actively managed, able to weather the Market cycles, have strong management and solid return rates. The expenses in both are decent but I think FBGRX is more. Contra is less risky than the Blue Chip.

Also I’m already invested in FXAIX ($30k), $3500 in FBGRX, $750 in bitcoin, and bought $2300 of Nvidia on the dip. I have $7k more to invest and plan to do so in FBGRX or FCNTX.

Please help me see how one or the other is better when the share prices are so vastly different. Thanks 🙏🏼
Hi Jen,

https://www.portfoliovisualizer.com/bac ... 0pn25gEnlj

Index’s do work well and the folks here will try very hard to convince you that their way is the only way. However, index’s are not for everyone. I will leave it up to them to explain why their way is better. However, I would rather give you my opinion on Contra and the tools to decide for yourself.

First, both of the funds easily beat the index’s that folks are recommending here more than offsetting the potential savings in fees.

2015-2024

https://www.portfoliovisualizer.com/bac ... dAof75zzxU

Of the two, morning star gives Contra 4 stars and FBGRX 5 Stars.

https://www.morningstar.com/funds/xnas/fcntx/quote

https://www.morningstar.com/funds/xnas/fbgrx/quote

Going back further, again, both easily beat the S&P index’s again between 2005 -2014. Pay close attention to the drop. The 2008 crash took both down almost 50%. They did better than the recommended S&P but a crash like 2008 can happen again. The S&P spent the most time underwater at 4 years 5 months, Contra 4.4 and Blue 3 years 2 months. If you are 6 years or more away from retirement, this crash is survivable, you will recover. If it happens again, never sell into a down market and keep investing throughout the crash. Just make sure you are ok with this amount of risk.

https://www.portfoliovisualizer.com/bac ... O6SiNjtFP8

Finnaly, 1995 - 2004 mixed results, Contra again blows away the S&P for 30 years running, Blue not so much.

https://www.portfoliovisualizer.com/bac ... tBhHk7oCJ5

Personally, even though, at the moment, Contra is underperforming when compared to Blue, I would invest in Contra. I owned it through the 2000s and it easily beat any index mix I threw at it. The folks here will try hard to convince you that you are doing something wrong. You are not, index’s are not for everyone, I been investing with actively managed funds since 1990 and still do today.

I have many reasons why I prefer them however, you are smart enough to do your own research. Use the back tester I provided, look at Morning Star, two other tools that can help you make an educated decision include.

Monte Carlo https://www.portfoliovisualizer.com/mon ... sisResults

And

Morning start X-Ray, especially if you want to lay out your entire portfolio and understand exactly what you are investing in. Especially the overlap. https://lt.morningstar.com/demo/module. ... dings.aspx

One other thing, Danoff is a confident manager who has been with Contra since 1990. I believe he is still there. He is one of the best. The fund has been around since the 60s. While Danoff is relevant to performance, one other thing you want to research is the funds values. Contra is very consistent with their investment approach. The board that oversees a fund is just as important as the manager. They are the ones that set the guardrails and dictate changes to a funds values.

That’s the glue that keeps these funds together when managers leave. The board sets the tone, defines and protects the values and keeps the guardrails in place to prevent managers from tanking a fund so badly, that it turns over investors. I find old funds like this one tend to keep these same values that keep their investors happy.

Contra is a 100+ billion dollar fund that is held in large institutional trust. The suggestion that a fund like this is going to simply underperform tomorrow and the index’s will catch up or lower fees will somehow bridge the difference? Umm, Maybe? I prefer to put my trust in Danoff and Contra There are reasons why old actively managed funds stay around 50+ years.

I can’t speak for Blue, I will leave it up to you to research both of them and make your own decision if either are right for you.

The question I have for you is, are you sure that you are mentally prepared to take this kind of risk? While I'm doubtful that Contra will underperform anything the index folks will throw at it thats invested equally, it's pretty aggressive. I.m the last one to talk about taking risk like this, I spent my entire accumulation period up until retirement two years ago leaning heavy into growth.

I was invested through the 2008 crash. Contra was my core holding and my portfolio lost 53%. It was terrifying and I second guessed everything. I also stayed the course, did not pull out, actually increased my contributions to capture some compounding both on the way down and back up, eventually gaining it all back plus many times more in the following years.

BUT, at the point I lost 53%, my nest egg had grown pretty large. You really don't know how you will feel until you see your money cut in half. Its terrifying. So think hard on how much risk you are comfortable with. If you think you can stay the corse, I think Contra is worth the ride.

If you have any questions for me, feel free to private chat me.

Oh, on fund price. The price you pay (not fee) for the fund itself is irrelevant. Like individual stocks, prices can be split. However when a stock is split in half say $100 to $50 shares, they double the amount of shares. Essentially it has the same value. It’s market cap and P/E ratios that matter with individual stocks that help determine risk vs value. Here is a good explanation how stock prices work. It applies to the mutual fund at a macro level.

Same idea.

https://www.investopedia.com/articles/i ... prices.asp

Good luck!

John
Last edited by itnetpro on Thu Jan 30, 2025 10:00 am, edited 2 times in total.
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TexNewMex
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Re: Buy fewer expensive funds or more of cheaper?

Post by TexNewMex »

tibbitts wrote: Wed Jan 29, 2025 8:54 pm As others have said share price is totally irrelevant.
I agree that mathematically the share price is irrelevant. There is, however, a behavioral/psychological aspect to investing. While I don't have the answers, I'm sure some hot shot marketing guru on this site can speak to there being a share price for [Fund "X"] above which individual investors would be less likely to buy.
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Re: Buy fewer expensive funds or more of cheaper?

Post by Rocinante Rider »

itnetpro wrote: Wed Jan 29, 2025 9:14 pm you just posted this on a Bogle Head index holy site...

disrespecting their faith in Indexs.
Faith can be defined as believe without evidence. As a dedicated Boglehead, I have no faith in index funds. :wink:
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Re: Buy fewer expensive funds or more of cheaper?

Post by calmaniac »

jen25w,

Your best investment is to learn more about investing. Most of us started our investing journey trying to pick winners (expensive vs. cheaper fund) and over time have come to understand what a random crap shoot that is.

Your best investment is to spend a few hours reading a book to understand a few basics on Index Investing. Quite literally worth its weight in gold.

Below is a list of suggested books. I don't have a great sense of the "best introductory book", but perhaps others will.
https://www.bogleheads.org/wiki/Suggested_reading

Additionally, please read on the Bogleheads investment philosophy and the Three-fund portfolio, links below. It will pay you back for years to come!
https://www.bogleheads.org/wiki/Boglehe ... philosophy
https://www.bogleheads.org/wiki/Three-fund_portfolio
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Re: Buy fewer expensive funds or more of cheaper?

Post by Beensabu »

jen25w wrote: Wed Jan 29, 2025 7:22 pm Please help me see how one or the other is better when the share prices are so vastly different. Thanks 🙏🏼
Just wanted to make sure you understand why share price is not what makes a fund expensive or cheap.

$7k will buy you 30.09 shares of FBGRX at $232.65/share, that are worth $7k in total.

$7k will buy you 316.45 shares of FCNTX at $22.12/share, that are worth $7k in total.

If the share price of FBGRX goes up by 5% (to $244.28), your 30.09 shares will be worth $7350 total.

If the share price of FCNTX goes up by 5% (to $23.23), your 316.45 shares will be worth $7350 total.

--

As someone else has said, the expense ratio (ER) is what makes a fund expensive or cheap, because that is what you pay to hold the fund.

That makes FCNTX slightly less expensive (ER of 0.39%) than FBGRX (ER of 0.47%). However, they are both quite expensive relative to FXAIX (ER of 0.015%).

--

As someone else has said, FBGRX and FCNTX are both US large growth funds. That means they hold the same company stocks (including Nvidia) already held by FXAIX (which is a S&P 500 fund). It's just that both of those large growth funds only hold about half of the same stocks as FXAIX, and they hold different stocks (or different amounts of the same stocks) as each other.

By holding FBGRX (or FCNTX) in addition to FXAIX, you are overweighting large growth stocks in your portfolio that is already only all US large company stocks. You are increasing the risk of your portfolio by doing that.

Nvidia is the top holding of FBGRX and the second top holding of FXAIX, and you also hold it as an individual stock. You are extremely concentrated in Nvidia (it is currently ~13% of your portfolio). You are increasing the risk of your portfolio by doing that because your portfolio return depends too much on the performance of Nvidia.

You can reduce risk by investing in something that you are not already invested in, like bonds, small/mid cap stocks, or international stocks. Most people here will say to use a low-cost index fund to do that.
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itnetpro
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Re: Buy fewer expensive funds or more of cheaper?

Post by itnetpro »

Beensabu wrote: Thu Jan 30, 2025 2:17 pm
jen25w wrote: Wed Jan 29, 2025 7:22 pm Please help me see how one or the other is better when the share prices are so vastly different. Thanks 🙏🏼
Just wanted to make sure you understand why share price is not what makes a fund expensive or cheap.

$7k will buy you 30.09 shares of FBGRX at $232.65/share, that are worth $7k in total.

$7k will buy you 316.45 shares of FCNTX at $22.12/share, that are worth $7k in total.

If the share price of FBGRX goes up by 5% (to $244.28), your 30.09 shares will be worth $7350 total.

If the share price of FCNTX goes up by 5% (to $23.23), your 316.45 shares will be worth $7350 total.

--

As someone else has said, the expense ratio (ER) is what makes a fund expensive or cheap, because that is what you pay to hold the fund.

That makes FCNTX slightly less expensive (ER of 0.39%) than FBGRX (ER of 0.47%). However, they are both quite expensive relative to FXAIX (ER of 0.015%).

--

As someone else has said, FBGRX and FCNTX are both US large growth funds. That means they hold the same company stocks (including Nvidia) already held by FXAIX (which is a S&P 500 fund). It's just that both of those large growth funds only hold about half of the same stocks as FXAIX, and they hold different stocks (or different amounts of the same stocks) as each other.

By holding FBGRX (or FCNTX) in addition to FXAIX, you are overweighting large growth stocks in your portfolio that is already only all US large company stocks. You are increasing the risk of your portfolio by doing that.

Nvidia is the top holding of FBGRX and the second top holding of FXAIX, and you also hold it as an individual stock. You are extremely concentrated in Nvidia (it is currently ~13% of your portfolio). You are increasing the risk of your portfolio by doing that because your portfolio return depends too much on the performance of Nvidia.

You can reduce risk by investing in something that you are not already invested in, like bonds, small/mid cap stocks, or international stocks. Most people here will say to use a low-cost index fund to do that.
Bump +

That’s why it’s especially important for you to put everything into that X-Ray tool I linked earlier to see exactly what sectors you are concentrated in and just how much overlap you have.

https://lt.morningstar.com/demo/module. ... dings.aspx

Actively traded funds, index traded funds or individual stocks all work in a portfolio. However, you still want to minimize too much overlap and try to diversify your holdings.

Both of your funds are heavy in Nvidia.

John
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Re: Buy fewer expensive funds or more of cheaper?

Post by White Coat Investor »

jen25w wrote: Wed Jan 29, 2025 7:22 pm I know this isn't a simple question and depends on the funds but I'm confused about what's better to buy between these two mutual funds. My goal is to stay invested in one for 15-20 years. My confusion is, should I buy less of an expensive fund or more of a cheaper fund.

Blue Chip (FBGRX) $220+ a share
Contrafund (FCNTX) $21+ a share

Both funds are actively managed, able to weather the Market cycles, have strong management and solid return rates. The expenses in both are decent but I think FBGRX is more. Contra is less risky than the Blue Chip.

Also I’m already invested in FXAIX ($30k), $3500 in FBGRX, $750 in bitcoin, and bought $2300 of Nvidia on the dip. I have $7k more to invest and plan to do so in FBGRX or FCNTX.

Please help me see how one or the other is better when the share prices are so vastly different. Thanks 🙏🏼
Welcome to the forum. Lots to learn. But you're worrying about all the wrong stuff. Your portfolio is at best a collection of investments. The real problem is it doesn't have enough money in it. I'd start there if I wanted to make a change. Without new additions, even if you manage 10% out of this portfolio, it only grows from $40K to $167K over the next 15 years. What happens then?

How much do you make and how much of that can you save? What can you do to increase those two numbers? That's where your focus should be right now, not on which of the hottest investments out there right now is least likely to implode over the next decade much less a non-concern such as share price.
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jen25w
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Re: Buy fewer expensive funds or more of cheaper?

Post by jen25w »

Thanks. I had no idea I didn’t have enough money in it (note the sarcasm) I make $50k - $60k a year and won’t have a problem investing $30k a year into my 401k investments.

I’m invested in an index fund however I’d also like to add an actively managed fund to my portfolio, hence the FBGRX. Index funds are solid funds and traditionally safe bets, however I’d like have a fund focused on growing vs staying just staying in-line with the market. Theres nothing wrong with that.



White Coat Investor wrote: Thu Jan 30, 2025 3:01 pm
jen25w wrote: Wed Jan 29, 2025 7:22 pm I know this isn't a simple question and depends on the funds but I'm confused about what's better to buy between these two mutual funds. My goal is to stay invested in one for 15-20 years. My confusion is, should I buy less of an expensive fund or more of a cheaper fund.

Blue Chip (FBGRX) $220+ a share
Contrafund (FCNTX) $21+ a share

Both funds are actively managed, able to weather the Market cycles, have strong management and solid return rates. The expenses in both are decent but I think FBGRX is more. Contra is less risky than the Blue Chip.

Also I’m already invested in FXAIX ($30k), $3500 in FBGRX, $750 in bitcoin, and bought $2300 of Nvidia on the dip. I have $7k more to invest and plan to do so in FBGRX or FCNTX.

Please help me see how one or the other is better when the share prices are so vastly different. Thanks 🙏🏼
Welcome to the forum. Lots to learn. But you're worrying about all the wrong stuff. Your portfolio is at best a collection of investments. The real problem is it doesn't have enough money in it. I'd start there if I wanted to make a change. Without new additions, even if you manage 10% out of this portfolio, it only grows from $40K to $167K over the next 15 years. What happens then?

How much do you make and how much of that can you save? What can you do to increase those two numbers? That's where your focus should be right now, not on which of the hottest investments out there right now is least likely to implode over the next decade much less a non-concern such as share price.
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Re: Buy fewer expensive funds or more of cheaper?

Post by Beensabu »

jen25w wrote: Thu Jan 30, 2025 7:00 pm Index funds are solid funds and traditionally safe bets, however I’d like have a fund focused on growing vs staying just staying in-line with the market.
Index funds are not safe and are not bets. The same is true of active funds.

Stock index funds are riskier than bond index funds. The same is true of active funds.

It helps to look at your portfolio as a whole (how do the pieces work together).
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Re: Buy fewer expensive funds or more of cheaper?

Post by coachd50 »

jen25w wrote: Thu Jan 30, 2025 7:00 pm Thanks. I had no idea I didn’t have enough money in it (note the sarcasm) I make $50k - $60k a year and won’t have a problem investing $30k a year into my 401k investments.

I’m invested in an index fund however I’d also like to add an actively managed fund to my portfolio, hence the FBGRX. Index funds are solid funds and traditionally safe bets, however I’d like have a fund focused on growing vs staying just staying in-line with the market. Theres nothing wrong with that.
You might want to recognize that once expense ratios are taken into account, most actively managed funds do worse than "staying in line with the market" over your investing time horizon.
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Re: Buy fewer expensive funds or more of cheaper?

Post by Rocinante Rider »

jen25w wrote: Thu Jan 30, 2025 7:00 pm I’d like have a fund focused on growing vs staying just staying in-line with the market.
There's an awful lot of growth to harvest from "just staying in-line with the market." If you had invested $1000 in an S&P 500 index fund at the beginning of 1995, it would have grown an average of almost 11% per year and now be worth over $22,000.

Yes, an index fund will never outperform the market it tracks. An index fund will also never underperform it's benchmark market, which is exactly what most actively managed funds will do especially as the timeframe lengthens. You might get lucky and pick one of the 1-2% of actively managed funds likely to outperform their benchmark indices over the next 25 to 30 years. The odds, however, of picking the right fund are stacked against you. Fees, trading costs, tax drag from portfolio turnover, and manager risk are just some of the things that depress the returns of active funds.

This short but classic paper by William Sharpe is worth a few minutes of reading time:
https://web.stanford.edu/~wfsharpe/art/ ... active.htm
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Re: Buy fewer expensive funds or more of cheaper?

Post by ApeAttack »

sailaway wrote: Wed Jan 29, 2025 8:23 pm
The two options you list are very different investments. How did you narrow down to those two? What are you trying to achieve here?
This is an important question that OP should address. I haven't looked into those two funds, but I would hope OP has a reason why he/she prefers those particular actively managed funds.
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Re: Buy fewer expensive funds or more of cheaper?

Post by White Coat Investor »

jen25w wrote: Thu Jan 30, 2025 7:00 pm Thanks. I had no idea I didn’t have enough money in it (note the sarcasm) I make $50k - $60k a year and won’t have a problem investing $30k a year into my 401k investments.

I’m invested in an index fund however I’d also like to add an actively managed fund to my portfolio, hence the FBGRX. Index funds are solid funds and traditionally safe bets, however I’d like have a fund focused on growing vs staying just staying in-line with the market. Theres nothing wrong with that.
Wow. I'm impressed. Few making $60K can invest $30K. You've fixed any possible problem you may have with your savings rate. Boosting income could still help of course.

The problem with actively managed funds is that few of them will actually beat a comparable index fund over the long term (especially after tax and expenses including the value of your time) and it's just about impossible to recognize the ones that do in advance and when they do, they beat it by such a tiny amount it wasn't worth teh trouble. . See pretty much anything ever written by Bogle, Malkiel, Ferri, Swedroe etc for details.

Index funds are not necessarily "safe" either. I owned an index fund in 2008 that invested in REITS that dropped 78% peak to trough. Few would refer to that as a safe investment.
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Re: Buy fewer expensive funds or more of cheaper?

Post by dogagility »

jen25w wrote: Thu Jan 30, 2025 7:00 pm ...FBGRX.
Will you be able to stick with FBGRX when the outperformance during the last 10 years of large cap growth stocks compared to a total market index fund ends?
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Re: Buy fewer expensive funds or more of cheaper?

Post by SnowBog »

jen25w wrote: Thu Jan 30, 2025 7:00 pm Thanks. I had no idea I didn’t have enough money in it (note the sarcasm) I make $50k - $60k a year and won’t have a problem investing $30k a year into my 401k investments.
Kudo's on the phenomenal savings rate! If you haven't seen it, recommend reading: https://www.mrmoneymustache.com/2012/01 ... etirement/

In particular, if you are able to keep up your high savings rate, you are setting yourself up nicely for "early" retirement if you want. (Of note, many of us struggle with savings rates in middle age, when we might have extra costs related to kids, house, etc.
So, it's OK if your savings rate changes over time, but as best as you can, continue to prioritize saving - and you'll be in great shape for retirement.
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jen25w wrote: Thu Jan 30, 2025 7:00 pm I’m invested in an index fund however I’d also like to add an actively managed fund to my portfolio, hence the FBGRX. Index funds are solid funds and traditionally safe bets, however I’d like have a fund focused on growing vs staying just staying in-line with the market. Theres nothing wrong with that.
Again, with your phenomenal savings rate - you've earned the right to invest in whatever you want. From that view, there's nothing wrong with you picking an actively managed fund with part of your investments. And you won't be alone in doing so - others also have some active managed funds in their holdings...

But what people like WhiteCoatInvestor, myself, and others are trying to point out is that statistically, those active managed funds will underperform a boring index fund. The data is there if you want it, several authors/books with it have already been referenced.

This took me a while to "get" as well... Some of us are hard wired to want to be "better than average", so why should I accept an "average index fund return" when in theory I could do better... But once you understand the data, you start to understand that theory doesn't match with reality. Sure, there are examples of funds that have beaten their market index for select periods of times. Good luck funding one that did so over 30+ years, which is your time-horizon as an investor. I don't remember the exact numbers, but one stat that stood out for me in the Boglehead's Guide to the Three Fund Portfolio, was something to the effect of with let's say 10,000 publicly traded stocks in the market, there is something like 100,000 different "packages" (active, passive, etc.) of those 10,000 stocks. As Bogle used to say, "don't attempt to buy the needle, buy the haystack."

Again, it's your money, with your phenomenal savings rate you can "afford" to invest in anything you want even if it ends up underperforming your expectations. We are just reminding you that you don't need to believe the "market hype"/"sales pitch" on active market funds, you are likely to have as good or better results with a simple index fund.
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Re: Buy fewer expensive funds or more of cheaper?

Post by itnetpro »

*deleted
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Re: Buy fewer expensive funds or more of cheaper?

Post by Silverado »

itnetpro wrote: Sat Feb 01, 2025 12:58 pm
Ignore the noise, make your own educated decision and good luck!

John
Forget the funds involved. The question posed (basically, is it better to hold five $20 bills or two $50 bills) definitely says OP is lacking in the “educated” part of making an investment decision. So I say a lot of this noise is actually signal.
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Re: Buy fewer expensive funds or more of cheaper?

Post by the_wiki »

Mutual funds it doesn't really matter because they trade in dollars. You just buy X dollars and the number of shares never matters.

ETF trade in shares so it can make a difference for trading convenience. For example, IVV is $600 a share. SPLG is $70 a share. It's a lot easier for most people to make a multiple of $70 a share work for regular investment vs $600.


But in general, it's just like asking if you want your $1 change back as 4 quarters or 10 dimes.
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Re: Buy fewer expensive funds or more of c

Post by itnetpro »

*Deleted…

John
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Re: Buy fewer expensive funds or more of cheaper?

Post by SnowBog »

itnetpro wrote: Sat Feb 01, 2025 12:58 pm Some folks are very rigid in their perspective and have difficulty understanding that one size does not always fit everyone and there are many ways to achieve our goals that work just fine.
...
Yes, it’s true, I was a bit lucky owning it ...
It's not about being "rigid" - it's about trying to help people avoiding attempts to "be lucky." That's what most of us eventually figured out - often the hard and painfull way. We learned that it's a fools errand trying to "pick" stocks (or by extension "pick" stock funds, or "pick" fund managers). We learned that it's impossible to "time the market", including trying to figure out when to get in or out, or when to switch investments between funds. Again, the data is there for anyone to review; this isn't "faith", it's well proven and consistent result over many, many years now.

You got "lucky" - and congrats to you! :beer Maybe jen25w will get "lucky" with picking an active fund as well.

But our investment advice isn't based on "luck." It's the "tried and true", "slow and steady", "boringly simple" way to achieve success.

To repeat a quote, I think I listed earlier, Bogle once said something like "the Three Fund Portfolio may not be the best portfolio, but it's better than an infinite number of worse alternatives." "Picking" stocks/funds is most likely going to put someone into that "infinite number of worse alternatives."

Obviously, people are free to make their own choices. People are free to ignore the advice offered. People are free to attempt to "be lucky", maybe they'll even "beat" the index and repeat the luck you claim.

In jen25w's case, again they have an exceptional savings rate, and already invested primarily in an index, they are off to a great start! I personally don't think they'll gain what they think they'll gain by adding an active fund (which just duplicates things they already own, thus reducing diversification and raising risk) - but they are obviously free to do whatever they wish to do.
itnetpro wrote: Sat Feb 01, 2025 12:58 pm My perspective is, as long as you understand the risk, (And to a lesser extent the cost) I mean REALLY understand through testing your choices using back test and researching the actives you are considering. You are golden!
Wise advice - but I'm not sure how that advice comes across when you are basically giving a "thumbs up" without them having actually done the work to "REALLY understand" the risk...
itnetpro wrote: Sat Feb 01, 2025 2:58 pm It’s up to her to decide how little or much she wants to learn about investing. I did not discourage her because of the question or choice of funds to invest in. She did pick two out of the thousands. Both are pretty much stand outs in the actively traded world. She must have done some research.
I'm not sure how this squares with your prior comment. You are making an assumption on the research they did, because they happened to name a few funds you are familiar with - and presumably personally like. Do they "REALLY understand" the risks? Or are they just getting the "hype" from others and following along?
itnetpro wrote: Sat Feb 01, 2025 12:58 pm Hence the part, index’s are NOT for everyone…
We are going to disagree here... Indexes are perfect for everyone.

But sure, indexes aren't "required" for everyone. The vast majority of my extended family and friends remains financially ignorant, still "trusts their finance guy", randomly picks funds in their 401k. If they save enough, they'll be just fine, despite making "less than ideal" investment choices... But 99.9% of them would have been better off using boring old index funds...

And again, indexes aren't "required" for everyone - definitely not the "Three Fund" variants. Some people are probably best served by a simple "one-fund" portfolio, such as a target date fund. Some prefer the simplicity of a dividend-based fund like Wellesley. Hopefully, they understand dividends are irrelevant. https://www.youtube.com/watch?v=f5j9v9dfinQ Hopefully, your mother is living a comfortable life and not artificially constrained by living off of "only the dividends."

But if your point is you aren't going to go and "convert" people to indexes - I'm OK with that. Again, the vast majority of my extended family and friends should be using indexes. If they ever ask me for financial advice I'll happily explain that I use indexes and if they want to know why I'll offer to explain it. But I'm not putting my nose in their business... People don't respond well to being "told" what to do...
itnetpro wrote: Sat Feb 01, 2025 2:58 pm You can give me your best 3 index fund portfolio that you could possibly come up with. I can backtest and find an old active that not only crushes it but more than makes up the fee over a lifetime.
Sorry, but this just sounds silly to me... Life is not lived in reverse... We can't simply "mine the data" and "pick" the thing that once worked...

Or to make a more direct point, if it's so easy, and if the data is there to support finding something better than an index, then why are active fund managers consistently failing to provide better results? These are highly skilled people, with vastly more resources than we have, yet year-after-year, they can't consistently beat the index... Again, this is backed by data: Again, maybe you and/or jen25w will be "lucky" and find that 6% who beat it over 20 years... I'd rather not rely on luck...

This is what the people suggesting the benefits of using boring old index funds understand. The data shows they are almost always better, and the odds of you picking the few that might be better are not in your favor... Why take the added risk, when "slow and steady" gets things done...
itnetpro wrote: Sat Feb 01, 2025 2:58 pm It’s up to her to decide how little or much she wants to learn about investing. I did not discourage her because of the question or choice of funds to invest in. She did pick two out of the thousands. Both are pretty much stand outs in the actively traded world. She must have done some research.

Let’s educate, give the tools...
What do you think it is we are trying to do?

We aren't simply patting jen25w on the back and saying "hey, I like that fund, you'll be fine"... One could argue that is condescending...

We are attempting to educate, to share what we've learned - often the hard way, and help them make up their own mind...

“There are three kinds of men. The ones that learn by readin’. The few who learn by observation.
The rest of them have to pee on the electric fence for themselves.” Will Rogers

Again, they are free to ignore our advice. Some of us just have to pee on the electric fence ourselves... :wink:

itnetpro wrote: Sat Feb 01, 2025 2:58 pm stop criticizing someone like here with condescending tones. We were all in her shoes once…

She came here to learn not be ridiculed…
Here, I'm in violent agreement! :sharebeer
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Re: Buy fewer expensive funds or more of cheaper?

Post by GoldStar »

the_wiki wrote: Sat Feb 01, 2025 2:54 pm Mutual funds it doesn't really matter because they trade in dollars. You just buy X dollars and the number of shares never matters.

ETF trade in shares so it can make a difference for trading convenience. For example, IVV is $600 a share. SPLG is $70 a share. It's a lot easier for most people to make a multiple of $70 a share work for regular investment vs $600.


But in general, it's just like asking if you want your $1 change back as 4 quarters or 10 dimes.
You can often buy ETF shares in dollars or shares - depending upon brokerage.
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Re: Buy fewer expensive funds or more of che

Post by itnetpro »

*deleted

No point in arguing here anymore. Looks like you all sacred away the OP and she got better advice elsewhere. I’m no longer going to contribute my inferior point of view here so I will go elsewhere.

Regards,

John
Last edited by itnetpro on Sat Feb 01, 2025 9:08 pm, edited 1 time in total.
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Re: Buy fewer expensive funds or more of cheaper?

Post by Beensabu »

itnetpro wrote: Sat Feb 01, 2025 3:56 pm What did you give her?
The person who gave her the best gift is this poster:
Rocinante Rider wrote: Thu Jan 30, 2025 7:45 pm This short but classic paper by William Sharpe is worth a few minutes of reading time:
https://web.stanford.edu/~wfsharpe/art/ ... active.htm
It's a really good gift.
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jen25w
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Re: Buy fewer expensive funds or more of cheaper?

Post by jen25w »

SnowBog wrote: Sat Feb 01, 2025 12:03 pm
jen25w wrote: Thu Jan 30, 2025 7:00 pm Thanks. I had no idea I didn’t have enough money in it (note the sarcasm) I make $50k - $60k a year and won’t have a problem investing $30k a year into my 401k investments.
In particular, if you are able to keep up your high savings rate, you are setting yourself up nicely for "early" retirement if you want. (Of note, many of us struggle with savings rates in middle age, when we might have extra costs related to kids, house, etc.

I can retire early? How? That would be awesome but I feel like many people on Bogleheads have hinted that I’d need 2.5 million to retire comfortably because of inflation. :( There’s no way I’ll have that much money.
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Re: Buy fewer expensive funds or more of cheaper?

Post by secondopinion »

jen25w wrote: Mon Feb 03, 2025 12:01 am In particular, if you are able to keep up your high savings rate, you are setting yourself up nicely for "early" retirement if you want. (Of note, many of us struggle with savings rates in middle age, when we might have extra costs related to kids, house, etc.

I can retire early? How? That would be awesome but I feel like many people on Bogleheads have hinted that I’d need 2.5 million to retire comfortably because of inflation. :( There’s no way I’ll have that much money.
That depends on how early one retires and how much they spend. For me, 2.5 million would be overkill even in my early thirties. The target needs to be realistic.
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Re: Buy fewer expensive funds or more of cheaper?

Post by notjackbogle »

jen25w wrote: Mon Feb 03, 2025 12:01 am I can retire early? How? That would be awesome but I feel like many people on Bogleheads have hinted that I’d need 2.5 million to retire comfortably because of inflation. :( There’s no way I’ll have that much money.
Your previous message said you're living on about $25K/year. $2.5M would be 100x your annual expenditures. That seems kind of a high multiple (the 1% rule I guess).
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Re: Buy fewer expensive funds or more of cheaper?

Post by SnowBog »

jen25w wrote: Mon Feb 03, 2025 12:01 am
SnowBog wrote: Sat Feb 01, 2025 12:03 pm In particular, if you are able to keep up your high savings rate, you are setting yourself up nicely for "early" retirement if you want. (Of note, many of us struggle with savings rates in middle age, when we might have extra costs related to kids, house, etc.
I can retire early? How? That would be awesome but I feel like many people on Bogleheads have hinted that I’d need 2.5 million to retire comfortably because of inflation. :( There’s no way I’ll have that much money.
As a general rule, I'd recommend avoiding "comparisons", especially in dollars, as they are likely not applicable for you...

Think about it this way, if someone spends $250k/year - they need to save a lot more than someone who spends $25k/year... So, trying to compare "dollars saved" isn't really a useful reference...

The link I shared before (with the chart), has a better explanation than I can provide...

But as an intro, there's a "rule of thumb" that for a "normal" (30-year) retirement, one could live off of "4%" of their retirement savings. If your current expenses are $25k, you can divide that by 4%, and get $625k - that's a good "savings target" for a normal (30-year) retirement. For an "early" retirement (more than 30-years), probably better to use something like 3% (depend on how early), which would give you a "savings target" of $833k.

Inversely, if you had $625k saved, with annual expenses of $25k, you have saved 25 times (25X) your expenses ($625k / $25k); if you had $833k you'd have 33 times (33X) your expenses. If you want to compare something - compare the "X" of expenses saved.

The amount of your required retirement savings always comes back to your expenses. If someone want's to spend twice as much ($50k/year), they'll need to save twice as much. The $ amount saved will be different, but the "X" saved will be the same.

So, if your annual expenses are $25k, it would be insane for someone to tell you that you need to save $2.5M to retire. As notjackbogle noted, that would be 100X your expenses, which is vastly more than you'd actually ever need...

If your expenses are $25k/year, as noted above, a more realistic savings target is $625k - $833k, depending on "when" you want to retire (to "retire early", you'd need to save more as you have more years to live off your savings).

Now, if/as your annual expenses increase, that obviously affects how much you need to save. Some "temporary" costs like paying off a house (assuming you pay it off before retirement) won't have a long-term impact (other than leaving you less to save per year until paid off). But if/as you have "lifestyle inflation" - decide you want to live in a nicer place, drive a nicer car, take more/better vacations, move to a higher cost of living area - and your annual expenses increase - that would likewise impact the amount you need to save.

However, you presumably are also contributing to Social Security, and will qualify for Social Security benefits later in life. That "income" is basically a direct offset against your "expenses". So, let's say your retirement expenses are estimated to be $40k and you get $10k from Social Security, your gap is $30k; 25X would be $750k, 33X would be $990k.

I personally wouldn't get too hung up on the details for now (assuming you are many years away from retirement)... So long as you live below your means, continue to save (at least 15% - and you are well past that), don't take crazy risks, and otherwise follow the "slow and steady" Bogleheads Investment Philosophy (https://www.bogleheads.org/wiki/Boglehe ... philosophy), you will likely do very well for yourself. You are already off to a great start! (If I had saved 50% of my income starting out - I'd be retired by now...)
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