Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Expenses
Old 02-06-2007, 04:18 PM   #1
Recycles dryer sheets
KM's Avatar
 
Join Date: Jan 2007
Posts: 481
Expenses

I know you should look for funds with low expenses. Am I figuring this out correctly? Assume you had 10,000 to invest:

FUND A has expense of 1.5% and returned 11% - you would have $11,100 before expenses and $10,933.50 after expenses

FUND B has expense of 1.0% and returned 10.8% - you would have $11,080 before expenses and $10,969.20 after expenses

FUND C with expense of .10% and returned 9.5% - you would have $10,950 before expenses and $10,939.05 after expenses


So, ultimately, the return - expense is what you should really be looking at. If FUND B consistently (which I think is the key here?) returned 10.8, it would be the best choice, although not the lowest expense?

KM is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Expenses
Old 02-06-2007, 04:21 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Apr 2006
Posts: 1,490
Re: Expenses

returns are figured after the expenses have been deducted.
d is offline   Reply With Quote
Re: Expenses
Old 02-06-2007, 04:26 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Brat's Avatar
 
Join Date: Feb 2004
Location: Portland, Oregon
Posts: 7,111
Re: Expenses

In most cases the expenses are taken out before the return calculation (exception are transaction fees, loads, 12(b)1 fees).

The import of expenses is that the fund manager must earn the difference in investments to come out ahead. For example, fund C has an expense of 0.1% and fund A 1.5%. The manager of fund A must CONSISTENTLY earn more than 1.4% than the manager of fund C.

Historically managers have not been able to beat indexes consistently. Index funds have very low expenses.
__________________
Duck bjorn.
Brat is online now   Reply With Quote
Re: Expenses
Old 02-06-2007, 04:56 PM   #4
Recycles dryer sheets
KM's Avatar
 
Join Date: Jan 2007
Posts: 481
Re: Expenses

So the published return is after the expense. That's what I wasn't sure about. I pretty much stay with index funds, but I have some other choices in our 401ks and the non-index returns seem to always be much better. Before I spent too much time going through the stuff, I wanted to be sure I knew what I was looking at. Thanks!
KM is offline   Reply With Quote
Re: Expenses
Old 02-06-2007, 04:57 PM   #5
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Re: Expenses

What D and Brat said, but caveat emptor. The way expenses are presented can be deceptive. Returns net of expenses is what you want to use to compare funds, and these are usually embedded in the total return numbers.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Re: Expenses
Old 02-06-2007, 06:03 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 11,318
Re: Expenses

Quote:
Originally Posted by KM
So the published return is after the expense. That's what I wasn't sure about. I pretty much stay with index funds, but I have some other choices in our 401ks and the non-index returns seem to always be much better. Before I spent too much time going through the stuff, I wanted to be sure I knew what I was looking at. Thanks!
There may be a bit of survivor bias at play here. The funds yo see are the good ones that have survived a few years -- but they may not survive this year, or next. I also have a number of managed funds (load funds I got into before I knew better). The funds the advisor suggested were always highly rated and generally performed fairly well. But I have been closely monitoring them since joining this group. I have concluded that, overall, I would do better with indexes or a simple target retirement fund. This year, for example, a high flying Calamos fund with more than $100K did very poorly. It dragged my overall averages below what I would have gotten with a TR. One of the other managed funds also did poorly. I have decided to pull all of these funds out and move to Vanguard. I still have some losses I accrued in 2001-2002 that I can use to offset most of the gains so the move will be fairly painless.
__________________
Idleness is fatal only to the mediocre -- Albert Camus
donheff is offline   Reply With Quote
Re: Expenses
Old 02-07-2007, 08:27 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
Re: Expenses

I've yet to see an expensive fun outdo its index over 10+ years, aside from Bill Millers current fund and Peter Lynch's Magellan. Lynch ran out of luck. So will Miller.

If you're paying over .50% (or less than half that for common US funds) you're going to be financially sorry sooner or later.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Expenses Vincenzo FIRE and Money 11 05-13-2007 07:48 PM
Expenses after FIRE - Huh?? Rich_by_the_Bay FIRE and Money 55 04-23-2007 02:32 PM
401k Expenses devo Young Dreamers 22 01-30-2007 06:25 PM
Monthly expenses eyetri2 FIRE and Money 27 04-16-2006 08:35 AM
"Strategy fund" expenses - double dipping? Rich_by_the_Bay FIRE and Money 4 03-04-2006 08:34 AM

» Quick Links

 
All times are GMT -6. The time now is 09:20 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.