It is interesting how much fees decrease retirement account balances. The calculations linked below show that a retirement account balance could be $577,000 using low-cost index funds, approximately $40,000 lower using higher cost active funds and $130,000 lower using the combination of active funds and a financial advisor asset under management fees.
I used the calculator at dinkytown.net to because the calculator allows for three investment fee percentages in one calculation. The arbitrary figures I used was for an individual with starting amount of $0 who invests $500 monthly at the beginning of each month for 30 years. The average annualized rate of return selected was 7%. Shown are rounded off retirement balances after 30 years for 4 different expense situations:
A) Balance of $577,000 if total investment fee was 0.1% (average for index fund expense ratio),
B) Balance of $536,000 if total fee was 0.5% (average for active funds expense ratio),
C) Balance $481,000 if total fee was 1.1% (index fund expense ratio combined with a common asset under management advisor fee of 1%),
D) Balance of $447,000 if total fee was1.5% (active fund expense ratio combined with a common assets under management advisor fee of 1%) .
You can enter your own figures to calculate the effects on fees on your retirement account.
Compare Investment Fees
have always considered âthe marketâ, to be a long con ponzi.
when my wife died 4 years ago, i cut my hours and wound down my iraâs
i have more than enuf and a lo ball lifestyle that inflation WILL NEVER be an issue.
ss starting next year will just be a cherry on the top.
instead of âincome streamsâ, i have opted for an âasset poolâ.
When you run the impact of fees itâs truly astonishing and scary. Advisors really lunch on your liver. Iâve been self directed investing with low cost funds my entire investing life, and will do so as long as I can.
Do active fund managers outperform the index?
The report first began publication in 2002 and has tracked what percentage of actively managed funds have outperformed the S&P since that time period. As time goes on, the number increasingly drops, and according to the data, only about 10% of actively managed funds have outperformed the S&P 500 over the past 15 years.Sep 16, 2022
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Index Funds are not sexy but they get the job done and more often with better results.
If it ainât Fidelity, or Vanguard or Schwab, Iâm not interested.
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There was a time when I chased the hot funds. Remember the No loads⌠Janus, Scudder, Invesco Financial Funds⌠I have never invested in a Load Fund. It is sort of like staring a race 10 yards behind the start line.
I only invest in index ETFs anymore, I just have literally three individual stocks, and not very much invested in those either. But when I say âindex ETFsâ itâs different sectors, not just S&P 500. US large caps, Foreign developed, Emerging market.
I was retired before ETFâs became the big new thing.
I like the ability to control Capital Gains.
But⌠too much gain to pay taxes on to change now!!
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As I recall Vanguard was a relatively late comer to ETFs.
When Vanguard got in, it gave ETFâs credibility even to this Geezer.
A good source of information about the poor performance of actively managed funds compared to lower cost index funds is the SPIVA report.
âFor the last 15 years, 89.38% of actively managed funds underperformed the S&P index.â
You have to be kind of careful with that, and itâs not because I am trying to defend high-fee mutual funds. Not at all.
I object to using SP500 as the be-all and end-all comparative index. The objective is not to beat the S&P, the objective is to create after-tax, after-inflation income streams to fund your lifeâs activities. Theyâre not the same.
Maybe thereâs a really good mutual fund or ETF out there that is the perfect one for YOU, because it controls drawdowns, has high risk-adjusted returns, but if you mentally screen it out because over the past decade it yielded 2% per year less than S&P that would be sort of tragic.
Because maybe the S&P is going to dump 50% again like it did twice since 2000, but this other fund is only going to dump 25%, and maybe a big dump torches your retirement plans, if youâre nearing retirement.
Get the investment that fits you, not fits some arbitrary yardstick. Did you know the stock inclusion into the S&P500 is not automatic and passive, itâs done by a COMMITTEE? That scares me a bit.