Vanguard Vs. Axa - The Equitable
Posted 08 May 2006 - 05:41 PM
It would be great if someone had specific examples of say the EQ/Alliance Common Stock (B Share) to the Vanguard Wellington fund. What would the difference be if you put in $5000 a year to 25 years between these two funds?
Posted 08 May 2006 - 06:27 PM
Since you are new to this, I thought that I would do some of the leg work for you. I encourage you to follow up and check out the 403bCompare site.
It's a bit deceiving to compare the two funds you cited because they have different objectives. The Equitable Life fund is, as the name implies, a stock fund. The Wellington fund is a balanced fund that typically allocates about 60% of the portfolio to stocks, and 40% to bonds.
Nevertheless, let's suppose that you invest your $5000 per year in each fund, and that each fund has an average annual return of 8% before expenses. After 25 years of investing $5000 per year, here are the returns after expenses:
Eq. Life: $284,580
The Equitable Life fund has an expense ratio of .54% (not bad), but a mortality and expense charge of 1.20%, for a total annual cost of 1.74%.
Wellington, by contrast, has an expense ratio of .36%.
As you can see, costs matter a great deal.
Posted 08 May 2006 - 07:06 PM
AP teacher tells it all. Another way to present this in a quick way is to mentioned that there is an extra 1.2 percent hit on the fund each and every year. This is cumulative, so over 25 years the investor is paying an additional 30 percent on their investment (and the amount of return on investment is so decreased).
If you are interested, try reading Common Sense on Mutual Funds by John Bogle, founder and former ceo of Vanguard. This book will illustrate the importance of cost in investing.
Posted 08 May 2006 - 09:55 PM
Try the 403bcompare website run by the state of California. Go to "Find a Vendor" on right hand side. Then Click "A" and you will see at end of list: AXA Equitable Life Insurance Company. Select "V" to go to Vanguard.
Where did you get these expenses? - I could not find this on the 403BCompare website.