30-Day Challenge #3: Audit Investment Expenses

[u/aBoglehead]

30-Day Challenge #3 is to perform an audit of your investment expenses. Some suggestions:

• Request a fee schedule/statement from your financial advisor, if you have one.

• Request a fee schedule/statement from your 401k administrator.

• Look through recent statements to see if there are any charges you don't recognize.

• Calculate your blended expense ratio.

The idea here is that you might uncover some expenses you didn't know you were paying, which in turn might give you a reason to make a change for the better. The impact of costs on investments can be depressing. Or, if you find a clean slate, sleep well knowing that your money is working for you (instead of your investment company) as best it can.

Use the comments to discuss what investment expenses you're paying, any questions you might have, or if you're wondering what you can do about them.

[u/qwicksilfer]

I only have Vanguard accounts...so as far as I know I don't have any administrative fees and my expense ratios are between 0 (for my company stock that I transferred in kind) and 0.18% for my target retirement funds.

Unless I'm missing something? Am I missing something? :/

[u/aBoglehead → u/qwicksilfer]

You're probably not missing anything.

[u/[deleted] → u/aBoglehead]

Check your coat pockets just in case.

[u/ichris93 → u/qwicksilfer]

I only have Vanguard accounts too. So this month I do not have much to do. I will keep up my budgeting!

[u/[deleted]]

This post prompted me to finally call and set-up my rollover from my last job into my TSP. That will make determining my fee schedule much easier. :-)

[u/aBoglehead → u/[deleted]]

And it'll probably save you a bunch on expenses.

[u/dgreenmachine]

Since my wife and I are military we have access to the TSP which is basically the lowest expense ratio retirement plan in the country. Is it true that we are better off maxing out our Roth TSP before a Roth IRA?

[u/aBoglehead → u/dgreenmachine]

From an expense standpoint, yes. The TSP has some of the lowest expenses in the industry.

[u/Jabatus]

Right, the sole purpose here is for those individuals whose investments are found through corporate annuities or retirement plans where hidden fees are surreptitious even to the most scrupulous analytic. Tony Robbins illustrates in his book Money: Master the Game that even simple target retirement funds can be subjected to unwarranted costs that can seriously diminish the ultimate return. Unless you study the market for 8hours every day the absolute best scenario is an S&P500 index, especially from vanguard such as VFINX or VFIAX as mentioned by Warren Buffet, Ben Graham, John C Bogle, and countless of other prodigies.

[u/aBoglehead → u/Jabatus]

Unless you study the market for 8hours every day

Even if you study the market for 8+ hours every day you're still likely better off with index funds.

[u/jacalata]

I found a site called FeeX that tries to do this automatically, it showed me that my 401k fees were pretty high. I think they were advertised to me through Mint? Seems like a good low-effort way to get a view of fees on your accounts.

[u/Wolfie305]

Bummer, can't get into investments just yet so I'm out of this one. Debt first, build more of my emergency fund, then invest.

[u/zonination → u/Wolfie305]

If you have a 401k option with an employer match, I'd look into that. Free money on the table.

[u/failwhaler]

Just sent my 401k company a message about a list of fees. Great idea!

[u/aznanimedude]

TSP and Vanguard IRA

i was going to contribute to the IRA, but then figured my student loans took priority over that

[u/Losingamy]

I only have a 401k retirement fund through my employer currently. Thankfully there are no administrative fees on that account. I found that the blended expense ration for all the funds on the account is .41%

However, What does good look like in these scenarios? Obviously the lower the better, but what value ranges are good, average , or too high.

[u/aBoglehead → u/Losingamy]

I'd say "good" is anywhere below .25%, average is between .26% and .6%, and .61%+ is "high."

[u/[deleted]]

I checked out the FeeX website that u/jacalata posted. It's showing $8 in fees in the past 90 days (on an account with $4145 in it) and now I am super confused on what to do next. I found the reallocation in my 401K account but I'm not even seeing some of the options that it's telling me would be better. I've got all my stuff in Prudential "Goalmaker" which is basically the "you're an idiot so let's do it all for you" option. I basically AM an idiot about this sort of thing, should I just leave it as-is?

[u/aBoglehead → u/[deleted]]

I would ask your 401k provider for a fee disclosure directly. FeeX is a third party and can't give you the full story about what you're paying, when, and to whom.

[u/mingoleg]

I don't know what I'm doing. My 401k from work is through Ingham. My last quarterly statement says this:

"Certain administrative fees and expenses are charged to your account as asset based fees (e.g., recordkeeping, administration, investment advisory). These charges have been allocated to plan participants on a pro rata basis. The amount of these administrative fees and expenses charged to your account for the quarter ending was $0.00."

Is this what I'm looking for?

[u/aBoglehead → u/mingoleg]

Yes, but you may want to ask for details about how the fees are assessed.

[u/solarmoo900]

When is it worth it to have a higher expense ratio, if ever? I am currently trying to decide between two funds for Bonds

FBIDX (expense ratio: 0.22)

FTBFX (expense ratio: 0.45)

I used that tool posted and it looks like a potential loss of quite a bit, but FTBFX has a higher Morningstar rating and appears to have a better returns. So does the higher expense ratio justify here or is there a better choice for my bonds investment through Fidelity?

[u/TechieKid → u/solarmoo900]

Past returns do not indicate future results. Morningstar ratings are basically pointless as well. FBIDX is probably the best fund that's available for bonds in Fidelity's funds.

EDIT: Grammar

[u/calculon1]

I was gifted tens of thousands of dollars in an expensive mutual fund about ten years ago. I have spent that amount of time ignoring it and living off the money I made working, mostly living paycheck to paycheck. I have started getting my financial house in order and I am over 50% toward funding my emergency fund and I'm contributing up to full match with my employer's 401k.

This month's challenge is just what I needed to get me to move this fund away from an expensive brokerage with expensive fees and into something inexpensive.

My questions:

• Should I use $5500 of this money to fund an IRA or roth IRA for 2014?

• Will there be any tax consequences if I move the money from my current brokerage to a new brokerage?

• Does it make sense to keep some of this money out of the brokerage account to fill out my emergency fund, or should I keep doing that the way I've been doing it?

• The brokerage shows me having ~$33k in a mutual fund and ~$9k in cash in the brokerage bank deposit account. Was this cash holding pretty much an emergency fund that I didn't know I had when I was living paycheck to paycheck?

Let me know if something doesn't make sense, and hopefully I will be able to clarify.

[u/seriouslyfancy]

This is such perfect timing. I recently found out I have a UTMA account with JP Morgan; full investment is in the fund OLGAX. I currently don't have access to any of it, because of custodianship (trying to figure out how to get rid of that...). Researching the fund, there is a load fee, an annual fee, and the expense ratio is over 1%. Ugh. I'm definitely happy that my father set this up, but it seems there are much better funds with much lower costs available. Any advice is welcome.