Efficient Retirement Investing

[mickeyd]

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.

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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.

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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.

More Efficient Investing In Retirement - Features

[DblDoc]

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.

DD

[friar1610]

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Originally Posted by mickeyd More Efficient Investing In Retirement - Features

Looks like a good web site - hadn't run across it before but, as a comitted indexer I'm interested in reading more.

[chinaco]

IMHO Indexing is the way to go. Unfortunately I have some money in active funds because 401k has limited options.