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tony

Will Someone Answer This

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I have struggled to get folks to understand what an expense ratio is and how it is applied. Some folks think its that one time a year $15.00 fee some funds charge, others don't understand why getting a fidelity fund through an insurance company is not the same as getting it direct. Even some great math folks don't get it.

 

Does anyone have an easy way to get this across to folks? I just talked to someone today that is paying over

2% ER in his 403b plan for an index fund. He thought it was a great deal because his advisor told him so.

 

Its very fustrating when smart people can't do simple business math.

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Its very fustrating when smart people can't do simple business math.

 

 

The general population are sitting ducks for this stuff. We just have to focus on those folks that want to learn and there are plenty, but they cannot find a site like this.

Steve

 

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This post might be of some use. My Webpage I share your frustration; I used to write more about the subject, but I got tired of being the "crazy" guy.

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I got tired of being the "crazy" guy.

 

 

But you won't get "tired" or be "crazy" with a financial secure retirement.

Just yesterday, I was helping my union with their annual retirement workshop. Someone came up and thanked me for articles that I wrote in the union newspaper. That was years ago. It is gradifying.

 

You never know how many people will admit that you have helped them. Keep it up.

 

Have a good day,

Steve

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Hello. There needs to be some sort of education for the new hires to a school district so they understand at least a few basics. I recall when I was hired and my wife in another district, we had to read thru and sign numerous papers and pamphlets on insurance, etc. I don't recall anything about retirement investing/planning. A friend who retired from my district told me he had first worked in LAUSD for about 15 years and he never heard anything about a 403b or anything else until after about 10 years in and that was from an annuity advisor.

 

It is a shame that anyone would be suckered into the high fees for a 403b.

 

We need to have with that thirty-minute paper-signing some sort of short overview for these folks so they can see there is something out there for their benefit and they can start a 403b on their own without a shark.

 

I suggest a 3-5 minute generic ###### on 403bs. We would need to convince our HR offices to make this ###### a part of signing the contract.

 

My motto that I share with anyone who will listen and in the adjunct university classes I teach:

 

Save as long as possible.

Save as much as possible.

Save in as low a fee, high quality option as possible.

 

Edy

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Hello. There needs to be some sort of education for the new hires to a school district so they understand at least a few basics. I recall when I was hired and my wife in another district, we had to read thru and sign numerous papers and pamphlets on insurance, etc. I don't recall anything about retirement investing/planning. A friend who retired from my district told me he had first worked in LAUSD for about 15 years and he never heard anything about a 403b or anything else until after about 10 years in and that was from an annuity advisor.

 

It is a shame that anyone would be suckered into the high fees for a 403b.

 

We need to have with that thirty-minute paper-signing some sort of short overview for these folks so they can see there is something out there for their benefit and they can start a 403b on their own without a shark.

 

I suggest a 3-5 minute generic ###### on 403bs. We would need to convince our HR offices to make this ###### a part of signing the contract.

 

My motto that I share with anyone who will listen and in the adjunct university classes I teach:

 

Save as long as possible.

Save as much as possible.

Save in as low a fee, high quality option as possible.

 

Edy

 

 

Nothing much has changed with LAUSD. The oversight committee couldn't even get the CFO to sign or veto our motions until a threat of some of us to resign got their attention. After four years of discussing ad nausea about informing employees that we have a lower cost 457b plan, the vast majority of 100,000 employees still do not know. We know from the reports we get that the TSA annuity sales are everywhere in LAUSD land.

 

Part of the problem is the culture of education to be anti capitalist and part is the regulations with the annuity connection with 403b since its inception in 1958.

 

Nobody said change is fast and easy.

Steve

 

 

 

 

 

 

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I have struggled to get folks to understand what an expense ratio is and how it is applied. Some folks think its that one time a year $15.00 fee some funds charge.

 

I admit I don't fully understand expense ratios. I'm new at this.

 

I get charged $10 a year per fund (currently invested in 2 funds). Umm...is that my expense ratio? I don't see any other fees on my statement. All of the sales charges are waived and my dividends are reinvested. Is this good or bad?

 

If someone can't explain what's going on, can someone give me a list of questions to ask my adviser? I feel like she and American Funds are purposefully opaque about their fees.

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Old hat

 

Your expense ratio is stated in the fund prospective and sometimes on line. In vanguard's case the expense ratio is clearly stated on its website for each fund. I think American Fund does too.They are taken out daily over the course of the year. What you describe in your post are fees associated with your fund but are not the expense ratios. Loads are what you pay to get into the fund.

 

Steve posted a great article recently which I suggest you read over and over again until you get it. Its not meant as insult to you for me to say that. Its just that it is probably the most important thing to understand when investing.

 

http://bwise.ibforums.com/index.php?showtopic=4808

 

You are correct that your advisor wants to be hazy about the details. If you really Knew what you are being charged, you might back out and they won't get that commission.

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According to the prospectus, the expense ratio for Capital World Growth and Income Fund is 0.83% and the expense ratio for Capital World Bond Fund is 0.87%.

 

But when I look at the account summary, my dollar contribution matches the shares I purchase ($ contribution = share price * # of shares). So where are they taking their 0.83% or 0.87% cut? I hope that makes sense but it looks like the fee is somehow "hidden," to my untrained eye at least.

 

Am I getting ripped off? Sorry if I'm pulling this OT, I really want to understand this stuff and not be financially illiterate anymore!

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Its taken out daily and is reflected in the share price. It doesn't always make sense but if you run your funds

on morningstar ######-ray -its usually free for a month -you will see exactly how much you are paying each year

in expense ratio. Its Eye opening. I used to pay $8,000.00 a year in expense ratios. Moving to Vanguard's index and managed funds I've cut my expense ratio to about 4,000.00 a year. Thats an extra 4,000 a year

that I don't have to pay some manager. it can add up quick.

 

 

 

Old Hat

 

Don't apologize for asking questions. Thats what this site is all about.

 

and no you are not getting ripped off becuase its all legal but you may be paying too much. I will say thats a good fund you are in and has probably done pretty good. Basically its a 500 index and an international index

fund combined. You might be able to get a comparable return by going 50% Vanguard 500 index and 50%

Vanguard Total International Index. The difference being-no front end load and lower costs so you pay less.

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May be way of base but I am sure someone will correct me if I am wrong. I explain it like this. Lets say the er is 1.0 If the fund has a reported 1 year return of 4 percent it actually earned 5 percent but the fund company kept 1 percent for themselves. Please correct me If my assumption is wrong!!!

 

Rich

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