Fees too high?

[geeman]

These are my expense Ratios for my taxable T Rowe funds...I'm thinking in the long run these will eat up my profits?

New Asia - 1.09%
Real Estate - 0.9%
Mid Cap Value - 0.84%
Retirement 2045 - 0.81%

Should I sell these off and move the money to something like the Vanguard Total Stock Market fund or should I sit tight?

Background:
22 years old

Roth IRA is with Vanguard (Retirement 2045) - $3400

401K split 50/50 - Maxim S & P 500 Index / Maxim Loomis Sayles Bond Portfolio ($160/month)

T Rowe Price:
Mid Cap Value - $1100
New Asia - $500
Real Estate - $1200
Retirement 2040 - $1110

I am putting about $400 a month into all of those fund.

 

[unclemick]

?Have you answered the question - who are you

Slice and Dicer or Boglehead?

If you think you have 20 yrs or more to DCA - my(read Boglehead) gut says TSM  and take the ride, keep the faith - and believe me - your faith WILL BE TESTED.

A little sour grapes on my part - I pissed away a lot of return on slice and dice(before the term was invented) in the 70's and 80's 'flat market'. 1966 - 1982 was chewy.

Now - there is more to choose from today - Read BOTH some Bogle (Common Sense --) and Bernstein (Four Pillars).

Your emotional midset(yes it is hormonal) will lead you to your choice - ala POGO.

An aside - my nephew age 21-31 under some 'Godfatherly' advice and Bogle's 1994 book maxed his TSP (C) - 1994 to 2004.

Unfortunately - stationed in California, read Four Pillars and has gone over to the 'DARK SIDE.' At least - when we last talked at Christmas - he's going to let Bogle ride with on ala De Gaul and putz with 'new  money'.

 

[JPatrick]

As managed funds go, those fees are not really out of line.
Of course you can always save (fees) with index funds, but the real proof is in the performance.
I'd do some comparisons to see where your funds stack up.  
My guess is that you would do better in index funds in at least some of those categories.
Vanguard is the index king, but Fidelity is coming on fast, so check out both.

 

[lazyday]

Those fees are below average, and T Rowe Price has an above average reputation for shareholder friendliness, so you could have done much worse.

But I suspect you'd be better off with cheaper index funds, such as from Vanguard. Some people who follow Bogle to the letter think that Total Stock and Total Bond are the best way to go.
I think it is lower risk and higher return to instead diversify in to different asset classes, like you are now. You could do that with Vanguard funds, and/or other low ER funds. Doesn't have to be index. (For example, Vanguard Health Care isn't index--it is closed though.)

In my opinion, the advice in Bernstein's The Four Pillars of Investing is best. Slice and Dice using cheap index, and rebalance once in a while, such as when adding new money.

 

[lazyday]

Oh-- In my opinion, Total Stock Market could be better than Slice and Dice if the slices are too tilted to Value indexes and/or Smallcap funds, which may be overpriced today.
But slice and dice that is more balanced, not too far from the current market, makes sense to me.

Not an easy thing to decide on at 22 (long time horizon)... Over the next 75 years, value and smallcap will probably outperform. But IMO they might not over the next decade or two. Or maybe even three.

 

[geeman]

heh, I guess it's not so cut and dry...

Would there be any point in opening up a taxable Total Stock Market fund at Vanguard along with my ROTH IRA (Retirement 2045)?

 

[JPatrick]

heh, I guess it's not so cut and dry...

Would there be any point in opening up a taxable Total Stock Market fund at Vanguard along with my ROTH IRA (Retirement 2045)?

A few other thoughts.  Your 2 retirement funds need a close look. I'm assuming these are the type that target your retirement date and balance themselves along the way.  A nice auto-pilot concept, but I've heard they may not provide the kind of returns your could get through a little do it yourself.  Worth a look.
I'd encourage you to add an emerging market index/fund also. Vanguard has a good one.
Another very good International Index fund is FSIIX which has a low, low expense ratio of 0.10.

 

[maddythebeagle]

You list the Mid Cap Value Fund. What do people think of midcap and small cap value? I have a midcap and small cap index with pretty low fees and am wondering if the value funds are nec.?

 

[azanon]

The only thing that looks problematic to me geeman is the 25% weighting in a real estate fund. I cant say ive ever seen a recommendation for that high a weighting in real estate in a portfolio. Worse, having real estate now could end up being like having a lot of tech in 1999. If you were in a mortgage, i'd recommend just avoiding it alltogether in your portfolio since the equity you'd be building in your home would represent more than enough of a portion of real estate in your overall (building) net worth.

But if you insist on having real estate in your portfolio, weight it like you would emerging markets or maybe precious metals - somewhere in the 5-10% range, not 25%. At 22, I recommend keeping the lion's share in domestic and foreign stocks of varying types.

 

[geeman]

I really appreciate all the help I am receiving here!

Let me just recap what I have taken from the replies...

-------------------
Taxable Accounts -

50% - The Total Stock Market Index Fund (VTSMX)
50% - Tax-Managed International (when I get $10000 to invest) (VTMGX)
-------------------
ROTH IRA -

5% (The REIT Index Fund (VGSIX))
25% Retirement 2045 (VTIVX)
70% (The Intermediate-Term Bond Index Fund (VBIIX))
-------------------
401K -

35% Maxim S&P 500
65% Maxim Maxim Loomis Sayles

I think I am almost there with help from all of you, thanks again.

 

[geeman]

Updated portfolio...what do you guys think?

Taxable Accounts - 40%

65% - The Total Stock Market Index Fund (VTSMX)
35% - Growth Index Fund Investor Shares (VIGRX)
-------------------
ROTH IRA - 30%

30% Wellesley Income Fund Investor Shares (VWINX)
35% Total International Stock Index Fund (VGTSX)
35% Vanguard Growth Index Fund Investor Shares (VIGRX)
-------------------
401K - 30%

50% Maxim S&P 500
50% Maxim Maxim Loomis Sayles

 

[ats5g]

Hi geeman,

The Total Stock Market and Growth Index have a whole lot of overlap, and do well [or poorly] more or less in the same time periods. Thus, not much diversification at all from holding both. Not too mention that if you don't have at least $10,000 or $5,000, you can get dinged with the low balance fees, that all index funds except the REIT index fund have.

A much simpler portfolio would be:

Taxable:
Total Stock Market Index

IRA:
Total Int'l Stock Index
REIT Index

401(k)
Maxim Loomis Sayles Bond
Maxim S&P 500 Fund [in case you need more stocks]

Then, as you acccumulate more money into the portfolio, diversify into small caps, value, TIPS, etc, if you so wish, as you accumulate enough money to not get dinged with the low balance fees.

Remember, when you're this young, and contributing a large % of the $$ value of the portfolio each year, the major determinant of your portfolio's value will be the contributions, not the performance.

that help any?

- Alec

 

[geeman]

I have all of my contributions deducted automatically from my checking account so I don;t ger lazy!