Mutual Fund Owners Take Note (Exp Ratios)

[freebird5825]

I ran across this article today at Morningstar.
http://news.morningstar.com/articlenet/article.aspx?id=332686

There is a link in first paragraph that opens to a table of average expense ratios for various classes of mutual funds from 1990-2009.
http://news.morningstar.com/pdfs/asset_ratios_0415.pdf
Some of those numbers certainly got my attention.

Back before I read enough investing books to understand how much "costs matter" over the life of a mutual fund based portfolio, I will admit to owning a few higher expense ratio funds. They have long departed from my holdings.

 

[Onward]

Interesting article & pdf. I wish the pdf had had an "Intl Bond" column. I think I'm paying .81% ER for RPIBX, and that irks me a bit.

 

[chinaco]

VG!

 

[deserat]

Wow - the names of those companies/product offering that increased their fees - I've never even heard of them.

Short story - early on in my investing career, I went to a broker, a friend, and she recommended this fund. I was naive so had her start a monthly deduction for allocation to this fund. A year or two later I started educating myself about investing and when I looked at this fund, I was aghast at how much was a fee to her on a monthly basis as well as the expense ratio to the company - yikes - I got out of that fast, however, I did lose a bit of my money in the process. And I wasn't making a whole lot then....amazing how much of a cut the middle man can take.

 

[FinanceDude]

Wow - the names of those companies/product offering that increased their fees - I've never even heard of them.

Short story - early on in my investing career, I went to a broker, a friend, and she recommended this fund. I was naive so had her start a monthly deduction for allocation to this fund. A year or two later I started educating myself about investing and when I looked at this fund, I was aghast at how much was a fee to her on a monthly basis as well as the expense ratio to the company - yikes - I got out of that fast, however, I did lose a bit of my money in the process. And I wasn't making a whole lot then....amazing how much of a cut the middle man can take.

You would be amazed at how LITTLe the rep really gets. Maybe I'll break it down sometime, not that anyone would believe the facts anyways..........

 

[Onward]

VG!

Last I heard, VG had no intl bond fund. Has something changed?

 

[chinaco]

Last I heard, VG had no intl bond fund. Has something changed?

It was direct to the OP about low cost.

understand how much "costs matter" over the life of a mutual fund based portfolio

VG does have international bond funds. But they are not available in the US.

There is a debate (philosophy) as to whether average US investors should hold international bonds (if they intend to spend the money in the US) due to currency risk, laws in other countries, higher cost, etc.

If VG developed a foreign bond fund for US investor, I would hope it would be a no load/low cost blended world bond fund (including US bonds). That way the fund manager would have the flexibility of rebalancing assets for longer term currency rate difference.

 

[WhoDaresWins]

Yes the expenses of funds vs performance are a much overlooked area. Not by people on this board for the most part, but for the "average" less well-informed investor. I was solidly in the latter group until recently, but I am taking a good hard look at things and making changes as far as practical.

 

[John Galt III]

Note that funds can have different tiers which have different "hidden" fees. Example. I signed up for the 401K with my company, and had all my contributions going into Wells Fargo Stable Return N, earning x percent per year. After about 6 months, the WF website announced all monies from Wells Fargo Stable Return N were going to be moved into Wells Fargo Stable Return N4. I checked out the interest rate for the N4 version of this fund, and lo and behold, it was a half percent lower. Same "fee" quoted, I think, but interest rate a half percent lower, therefore I the investor, am taking the half percent hit. I called up WF about it, and they acted like everything was fine, it happens all the time, and agreed that yes, I was losing a half percent in the deal, but my company had agreed to ( or perhaps requested? ) the change. The original fund , earning a half percent more, still exists, but is no longer available to us 401k holders, at my company. Sort of a take it or leave it situation. Possibly a kickback / cost saving deal for my company. I still have money in WF Stable Return N4 since I don't like the alternatives in my 401k very much.

 

[ziggy29]

It was direct to the OP about low cost.

VG does have international bond funds. But they are not available in the US.

There is a debate (philosophy) as to whether average US investors should hold international bonds (if they intend to spend the money in the US) due to currency risk, laws in other countries, higher cost, etc.

I'm skeptical about the diversification and non-correlation benefits of foreign bonds myself. Unlike foreign stocks, where you can play changing economic conditions and hedge your bets on where the growth will be, foreign bonds don't seem to add much except for the currency play which you can already get in international stock funds.

 

[Onward]

I'm skeptical about the diversification and non-correlation benefits of foreign bonds myself.

I was the same until I read Work Less, Live More. Bob makes a good case for holding foreign bonds in a diversified portfolio. Don´t have the book here to flip through, though.

 

[IndependentlyPoor]

Could somebody post the ticker symbols of foreign bond funds that have been around for a while? I would prefer funds that are not hedged if possible.

 

[chinaco]

A pitch from Wells Fargo. It would be good to see a historical comparison of A vs B protfolio instead of "may and should" language.

https://www.wachovia.com/foundation/v/index.jsp?vgnextoid=3ee475c8011aa110VgnVCM1000004b0d1872RCRD