Is a high ER ever 'worth it'?

[eta2020]

Actually VXUS is ETF version of VGTSX. VGTSX is active since 1996. One can compare long term returns of VGTSX versus FWWFX.

They are identical over last 18 years (not counting dividends). It looks to me over that period of time Vanguard had more dividends though and was more tax efficient.

VXUS 126 Billion dollars managed by fund.
FWWFX 1.7 Billion Dollars.

So my choice would be follow 126 Billion dollars of other people's money.

I realize that those 2 funds do not invest in same markets...hence they should not be compared...

 

[hlfo718]

Goes back to the original question, would one buy a higher ER fund? I guess it depends on how much higher? Vanguard's Wellington has higher expense than Vanguard Balance, around 0.25% vs 0.10%, either fund is a great choice.

While some funds do outperform, you need to know why they did. Was it because the fund invested in a difference market (Emerging vs Developed), size (small vs large caps), value (instead of growth)? Index funds is considered a "core" because it captures value, growth and anything in between. For example, Wellington is more a value fund so comparing to Vanguard Balance is not really correct.

So I would invest in a higher ER fund but know what you are buying is just as important as the ER, my opinion.

 

[Animorph]

Here's a list of 48 funds that M* (Russ Kinnel at least) likes. All lower quintile ER, but I think they are all active funds since they were selecting for index beating performance.

The Fantastic 48

"My criteria:

• Must beat the fund’s benchmark since the start date of the longest-tenured manager
• Must have expense ratios in the cheapest quintile of the category
• Must have a manager who has run the fund for at least five years.
• Must have a Morningstar Analyst Rating of Bronze or better
• Must have a positive Parent rating
• Must have at least one manager with at least $500,000 or more invested
• Must have overall Morningstar Risk that is not High
• Must not be limited to institutional investors"

 

[RobLJ]

My two core funds are Fidelity Contra and Low-Priced. Got lucky, but I did and do look carefully at 3, 5, and 10 year returns, as well as beta and Sharpe ratio. Contra has been getting so big that it is turning into something of an S&P index, despite Danoff's herculean efforts. But DW's portfolio core holding is the S&P index. I'm looking to probably cut Contra in 1/3, reluctantly after 20 years, to replace with a large value or low beta holding.
Vanguard Cap Opp is also a fine active fund, but it's a much smaller position in DW's rollover. And Fidelity Biotech is 25% of the other two but it was made almost 50%, but I have to manage it by harvesting gains when there is a sharp runup as in the early 2000s and the last 5 years. In extreme's I harvest semi-annually or even quarters at huge run-ups.

 

[galeno]

My investing philosophy is this: simple wide equity diversification at the lowest possible cost. FI = the cheapest bond fund available to us + cash.

Our portfolio's net (of taxes) REAL expected CAGR = 4.4%.

Subtract 1.2% for a 60% equity allocation retirement volatility for annual withdrawals. Subtract another 3.0% for our annual living expenses.

So 4.4-1.2-3.0 = 0.2% net real CAGR for our retirement portfolio.

Our portfolio's ER = 0.16%. There is NO WAY we could afford to pay more without having negative real portfolio growth.