VTIVX vs TRRKX expense ratio fees, is math right?

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SwedishRider

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I'm doing some review of my portfolio, and I'm calculating expense ratio costs across funds. Specifically, I'm comparing VTIVX and TRRKX purchased through their respective companies.

Expense ratio on VTIVX is 0.18%. So on a $5500 Roth IRA max investment, $5500 * .0019 = $10.45 in costs.

Expense ratio on TRRKX is 0.76%. So on a $5500 Roth IRA max investment, $5500 * .0076 = $41.80 in costs.

First off, is my math above correct? And second, can TRRKX's increased expense ratio be justified given its returns? Neither has any loads, so that's not a factor. I don't mind paying a higher expense ratio if the costs are buying better performance. And I do understand the active vs passive management styles and philosophies of the two companies. I don't think either strategy is perfect, but I'm open to the ideas of others on these two strategies. I don't have the time to trade stocks and I don't want to pay commissions to buy mutual funds through a broker. For now, the all-in-one target date fund strategy seems appealing.

Thanks for any feedback!
smile.gif
 
I don't like taget date funds, too conservative for my taste and fees are more than a basic SP500 fund.
 
I'm certainly not against creating my own mix of mutual funds. But I don't want to pay commissions on buying said funds through a broker. And I really don't want multiple accounts at multiple fund companies. I'd be willing to create a portfolio at one fund family instead of a target fund though. I still think it would come down to Vanguard vs T. Rowe Price.
 
Personally, I think either of those funds would be excellent if you're specifically looking for a target date fund. I believe Morningstar has extended cost figures for the 5 and 10 year buckets for each of these funds if you punch in the fund individually.

Generally, I like the TRP Target Date Funds because they typically have a higher percentage of stocks vs. the others. That's not the case here and I think that may be changing. Between 2010-2014, these funds were very comparable not including the expense ratio. I'd like to see a comparison between 2005-2009 to see how they differed.

What percentage of your portfolio is involved??

Personally, I think if this target date fund is 20% of your portfolio or less then I wouldn't get worked up over the expense ratio. If this serves more as a 'set and forget' core holding for retirement then I might take the Vanguard fund although I believe the T. Rowe fund might be a bit better. FWIW.
 
Thanks for the feedback. These would serve as the core holding in a set and forget style portfolio. It's appealing to just dump the money in a fund that takes care of rebalancing with no extra effort. That's why I'm thinking about which fund makes the most sense for the long haul. I would not use either fund if I was going to build my own portfolio. Those funds are appealing as a fund of funds though.

I guess I'm rambling because I'm thinking out loud and am not committed to anything yet.
smile.gif
 
Your math appears correct.

I'm a Vanguard investor, with 10% of my retirement savings in VTSAX as a Roth IRA. The remaining 90% is in my employer-sponsored 401k. I definitely appreciate the low fees at Vanguard. Their mobile app is pretty handy too.

VTIVX is the Target 2045 fund and is currently about 90/10 stocks/bonds. I think that's a great place to be since your retirement date is so far off. Put in $5,500 if you can now, and set up a payroll allotment come January for direct deposits right from your paychecks. If paid 26 times annually, that's about $211 per check. It's easy to make that happen and just leave it be. You should only have to change it when the annual maximum contribution is increased.
 
I'm probably the wrong guy to ask where expense ratios are concerned. Personally, I'm much more interested in what the fund, sector, investment, manager pays me if the expense ratio is far enough below 1%. Obviously, I'm not an indexer.

Being that you're not really contracted when you choose one or the other ( or something else ) and you're ( apparently ) dollar cost averaging, I might pick the cheapest of the two and see how things go for a couple years. I'm not a target date fund guy but it may serve you well until that time that you may or may not have a reason to move funds down the road.
 
Originally Posted By: Mr Nice
I don't like taget date funds, too conservative for my taste and fees are more than a basic SP500 fund.

Actually all those target retirement funds by vanguard are made up of 5 Vanguard ETF's :BSV (short term bond), BND (Domestic bod mix), BNDX (International Bond mix), VTI (Domestic stox mix), and VXUS (International Stock mix). Expenses on these will be around .1% About half of the packaged funds.

Can't beat Vanguards costs. Pay the 1.5% to 2.5% from an investment firm and get probably worse results. Been there done that.

If the fund is to concervative use a higher ratio of VTI and VXUS ETF's. IUts a no brainer.
 
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Question on fund expense ratios: Is the expense ratio charged on only the new money a client puts into the fund in a given year? Or the entire fund balance year after year?

The answer would make a profound difference in costs depending on how the expense ratio works.
 
Originally Posted By: Vanguard
A mutual fund's annual operating expenses, expressed as a percentage of the fund's average net assets. It's calculated annually and removed from the fund's earnings before they're distributed to investors, directly reducing investors' returns.

An expense ratio includes management, administrative, marketing, and distribution fees. It doesn't include loads or purchase or redemption fees.

The operating expenses are charged every year; this is how Vanguard gets paid.
 
There is no correlation between higher fees and higher returns.

The opposite is almost always true.

I'd recommend that you buy, or check out from the library, a copy of "Common Sense on Mutual Funds" by John Bogle. It'll open your eyes to the lie of higher fees = higher returns.
 
Originally Posted By: Mr Nice
I don't like taget date funds, too conservative for my taste and fees are more than a basic SP500 fund.


All you need to do is move the "retirement date" of the fund forward until you reach your risk tolerance.
 
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Originally Posted By: Kuato
Originally Posted By: Mr Nice
I don't like taget date funds, too conservative for my taste and fees are more than a basic SP500 fund.
All you need to do is move the "retirement date" of the fund forward until you reach your risk tolerance.

The one he's looking is 90% equities anyhow. No need to worry about it being too conservative.
 
I've always been a fan of John Bogle when I have heard him speak (can't say I've studied his ideas extensively though). Given that I'm at TRP right now, and have 25+ years to retirement, it does appear (after a few comparison model runs) that the target retirement funds at both Vanguard and TRP are not the best choices I could make. With a little effort, other portfolio choices could outperform both.

So for now, I think I'm going to move into PREIX, which is the TRP S&P 500 index fund with an expense ratio of 0.27%, and in the meantime, continue to do some homework on building a mutual fund portfolio. I do realize VFINX has the lower expense ratio of 0.17%, but until I'm confident I want to build my portfolio at Vanguard, PREIX is still a great, low cost index fund while I wait.
 
You'll do fine with the TRP offering. I've had some TRP funds in my portfolio for over twenty years now...
 
Sounds like a smart way of going about things if you're already with T. Rowe. I have four TRP funds and have been very pleased with them since the mid 90s when I first invested with them. Unfortunately, some of their best funds are currently closed to new investors but they're definitely one of the better fund shops.
 
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I was looking at the Target Date Funds from Fidelity through my employer and any fund has 0.08% expense ratio. So the 0.76% seems kind of high for me.


Quote:
Expense ratio on TRRKX is 0.76%. So on a $5500 Roth IRA max investment, $5500 * .0076 = $41.80 in costs.
 
Originally Posted By: Mr Nice
I was looking at the Target Date Funds from Fidelity through my employer and any fund has 0.08% expense ratio. So the 0.76% seems kind of high for me.


Quote:
Expense ratio on TRRKX is 0.76%. So on a $5500 Roth IRA max investment, $5500 * .0076 = $41.80 in costs.



Are you sure your Fidelity funds are charging only 0.08% for their expense ratios? Can you give the ticker symbol of one of the funds so that can be verified? That seems incredibly low given that even Vanguard's index funds aren't that low (unless you qualify for Vanguard Admiral Shares).
 
Yes. Fidelity Funds through my 401K (GE Retirement Savings Plan (03439). Here is a cut & paste of my investment choices for my 401K.
Sorry for the messy format, I don't know how to use the format feature on BITOG.


Name/Inception Date
Asset Class
Gross Expense Ratio**
Shareholder Fees


2020 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2025 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2030 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2035 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2040 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2045 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2050 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2055 TARGET RET FUND
01/03/2011
Blended Fund Investments 0.08% No additional fees apply.

2060 TARGET RET FUND
12/31/2014
Blended Fund Investments 0.08% No additional fees apply.

TARGET RET INCOME
01/03/2011
Blended Fund Investments 0.07% No additional fees apply.



Investments you currently own GE STOCK FUND
11/30/2009
Stock Fund Investments 0% No additional fees apply.

Investments you currently own US LARGECAP EQ INDEX
11/30/2009
Stock Fund Investments 0.01% No additional fees apply.

Investments you currently own US MID CAP EQ INDEX
12/07/2009
Stock Fund Investments 0.04% No additional fees apply.

Investments you currently own US SMALLCAP EQ INDEX
12/07/2009
Stock Fund Investments 0.04% No additional fees apply.
 
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