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tony

Don't Obsess Over Expense Ratios

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Actually I could have written some of this myself because I have touched on a few of the things this writer mentions here about fees in my own posts. Of course when he gets into spread sheets and comparisons I would have been lost.I think this guy has it mostly right in my humble opinion.

 

https://www.whitecoatinvestor.com/expense-ratios/

 

 

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I understand the white coat investor is just a person’s personal blog, but the tone of that article was absolutely biased and lacked a cold, objective analysis. It made it difficult to trust/read even if I agreed with a subset of the conclusions. 

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Well!! Of course everything that is written is biased these days but I share some of his opinions. I can not lie!!  All of this is food for thought. I am not against Fidelity personally or Charles Schaub.  I used to own Fidelity funds before I slimmed down and consolidated my holdings  into Vanguard which was the obvious choice at the time. Fidelity was the very first fund I ever owned BTW.  If I was starting now I might go with Fidelity zero index funds but I am partial to Vanguard's mission statement and its just not smart to move it if you have large accounts or taxable accounts. .But the major difference I see is that both Fidelity and Schaub have been exposed as  using index funds as a way to get folks in more expensive products. After all, they are out for profit and there is nothing wrong with that.  I believe TIAA has been implicated as well .I have posted articles and others  have posted articles as well in the past from former  employees ( disgruntled? maybe?-The truth is probably somewhere in the middle ) who stated as much.

Vanguard has an across the board low fees regardless if they are managed funds or index funds so their only incentive is to offer us lower fees across the board. Like the article said though , Vanguard is far from perfect but to me their mission statement and corporate philosophy is simply built on the investor's best interest.  After having been lied to and overcharged for years I feel I can trust them.

I think Fidelity's move  has put pressure on Vanguard to offer zero minimums in order to enter a mutual fund. However maintaining low balance accounts is expensive for Vanguard and that is one reason fees are charge and minimums are established. Vanguard is built on being frugal across the board in its operations. I would encourage Vanguard to perhaps lower the minimum to maybe $1,000 across the board and not just its Target Funds because I know its tough for folks to come up with three thousand to start a fund. As far as fees go I think Vanguard's economy of scale makes Vanguard the better choice for index fund investing even if their fees are slightly higher and I would encourage them to not get into a price war with Fidelity .

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If anybody prefers Fidelity’s zero index funds and you have a tax advantaged account (IRA, 401k, 403b, 457b, HSA, etc) then you can transfer the entire account to Fidelity without having to pay any taxes.

If you have a taxable account and don’t want to pay capital gains then you can simply stop investing in your current funds, turn off automatic dividend reinvestment, sell any lots that are at a loss, direct all new money to Fidelity, and tax loss harvest out of the funds if conditions permit.

If you have a taxable account and prefer the tax efficiency that Vanguard offers through their ETF/mutual fund patent, I believe that patent expires in a couple years and I imagine Fidelity and everybody else will use the same technique.

I personally don’t mind that the gambler clients at Fidelity are subsidizing my proper investments. To some extent I prefer it. To some extent that already exists in market crash when I keep buying and too many other folks sell at deep losses.

I like Vanguard’s mission statement, I like that the people who buy the funds own Vanguard, and I like that they run funds at cost. However, with Jack gone I’m not sure what to expect out of Vanguard. I mean they fought against the fiduciary rule didn’t they? I’m going to have a hard time trusting anybody who did that.

I don’t quite care about minimums. If you’ve got less than a few tens of thousands of dollars then time in the market means virtually nothing. So I don’t really mind the concept of people saving up to invest so that we all have lower fees. I don’t feel strongly either way, but it might lose Vanguard customers.

I’d like to see Vanguard reduce the cost of the all-in-one funds or have admiral versions. I don’t know what it really takes to run a fund like that, but I can’t believe they’re that expensive. A lower cost there could create a competitive advantage for folks who want simplicity (my wife would love it).

It’ll be interesting to see if Vanguard has permanently lost the lowest cost title. I’m hoping they continue dropping fees in the next year or two. After that I may make the switch to Fidelity. 

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Saving $40 per 100K in a taxable account doesn't make me want to run out and switch companies, especially until more data about the tax efficiency of the Zero funds comes out. If it turns out that they are equally or more tax efficient then it might be something to consider.

 

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MNGopher

I hope you will continue to offer your insights here and join our group on a regular basis!!.

Tony

 

 

 

 

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7 hours ago, tony said:

MNGopher

I hope you will continue to offer your insights here and join our group on a regular basis!!.

Tony

 

 

 

 

 

Thanks, It's great that there is a place like this where people can learn about the confusing world of 403B's.  The advise I got as a new teacher was something like, "You don't really need to invest, you have a pension, but if you do,  just put a minimal amount into a variable annuity".  I'm glad I eventually did my own research.  Today I do everything I can to steer young teachers away from variable annuities, without being pushy about it.  I wish more of them would take an interest in their own finances, especially with the shrinking of pensions.

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3 hours ago, MNGopher said:

 

  I wish more of them would take an interest in their own finances, especially with the shrinking of pensions.

Great advice!!

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3 hours ago, MNGopher said:

You don't really need to invest, you have a pension, but if you do,  just put a minimal amount into a variable annuity".

terrible advice

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