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Efficient Retirement Investing
Old 03-07-2008, 01:25 PM   #1
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Efficient Retirement Investing

This short article has some thought-provoking items in it. We DIY investors can really waste a lot of $ if we do not pay attention to the little things.

According to a 2007 study by Lipper, taxable mutual fund investors surrendered more than $20 billion to Uncle Sam in 2006. And over the past 10 years they lost 17% to 44% of their load-adjusted returns to taxes each year.
Trading costs, the major internal expense, can be estimated by a fund's annual turnover. Turnover of 100% per year results in additional costs of about 1.0%.
Market impact costs are low in funds holding large liquid stocks, but the cost can rise to over 1.0% per year in small-cap funds with large assets, according to Rick Ferri, an advisor and financial author.
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Old 03-07-2008, 01:41 PM   #2
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From "John Bogle on Investing..."

Average mutual fund expenses 1984-1999

Sales commission: 0.5% (annualized)
Cash drag: 0.6% - money not invested in the market
Transaction costs: 0.7%
Expense ratio: 1.2%
Tax: 2.7% !!!!

Total reduction in return: 5.7%
Reduction in return of the Wilshire 5000 Index fund same period: 1.1%

Yes, costs matter (alot). No, an active manager cannot consistently make that up despite what the financial porn press may claim otherwise.


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Old 03-07-2008, 02:22 PM   #3
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Originally Posted by mickeyd View Post
Looks like a good web site - hadn't run across it before but, as a comitted indexer I'm interested in reading more.
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Old 03-07-2008, 03:29 PM   #4
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IMHO Indexing is the way to go. Unfortunately I have some money in active funds because 401k has limited options.
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