401K B Fund Contributions
12-14-2019, 10:00 PM
#91
Squawking 2000
Joined APC: Jul 2015
Position: Skeptical
Posts: 737
The PRAP target date funds are about 40 Basis points (40/100 of 1%) because they are a mix of passive and active investing.
Industry average about 63 basis points.
Vanguard that RHA invested in about 9 basis points.
Schwab as two suites. Index funds for about 8 basis points and active management in the 40-60 range.
PRAP target date funds have performed well, both gross and net of fees.
Industry average about 63 basis points.
Vanguard that RHA invested in about 9 basis points.
Schwab as two suites. Index funds for about 8 basis points and active management in the 40-60 range.
PRAP target date funds have performed well, both gross and net of fees.
You wanna make a bet?
https://www.investopedia.com/article...-brka-brkb.asp
12-15-2019, 06:06 AM
#92
Gets Weekends Off
Joined APC: Dec 2008
Position: 777 Cap
Posts: 199
Maybe I’m missing something, but I’ve only been charged $2.30 worth of fees from Schwab in 6 months. Are these fees linked to the size of the account? Can I expect the fees to get bigger as the account grows?
Also, flap you’re gonna have to dumb it down for me please. Define basis points and 40/100 of 1%? And if ya don’t have anything better to do, explain active and passive management. I know what it is, but I want to make sure you know what it is.
Also, flap you’re gonna have to dumb it down for me please. Define basis points and 40/100 of 1%? And if ya don’t have anything better to do, explain active and passive management. I know what it is, but I want to make sure you know what it is.
If you have a million dollars and are charged 1% you pay $10,000.
1 basis point = $100
Total Stock Market index fund in the PRAP core costs only 1.45 basis points in fees, or $145 on a million dollar account.
That is an index fund that owns a basket of 3400+ stocks. By buying this you are buying the market, and not trying to beat the market. That’s passive investing. Buy the market (index funds)getting it as cheaply as possible.
PRAP also has International Index and Bond Index. You can build a 3 fund portfolio very very cheap in the PRAP core funds.
Active investing is where managers believe they can beat the market returns. They believe they have such a great process for picking stocks, that over time they will produce excess returns over those that buy index funds.
These actively managed funds charge much higher fees so they will need to have enough excess returns that they pay for their fees and make the whole excercise worthwhile
Difficult if not impossible to do over a long period of time.
PRAP International fund active vs PRAP International Index fund which is passive
This is why passive is so popular. So cheap it’s almost free and happy to get the return of the market.
12-15-2019, 06:15 AM
#93
Gets Weekends Off
Joined APC: Dec 2008
Position: 777 Cap
Posts: 199
You’re exactly correct, and those index funds at 0.08% are far cheaper than the actively managed ones at 0.4-0.6% (literally 5X to 8X cheaper). Guess what else: The cheaper index funds will outperform.
You wanna make a bet?
https://www.investopedia.com/article...-brka-brkb.asp
You wanna make a bet?
https://www.investopedia.com/article...-brka-brkb.asp
Since our target date funds are custom, our benchmark for measuring outperformance is also custom accounting for passive returns of different underlying investments
They have had outperformance but only by a couple of basis points. One could argue not worth the effort
12-15-2019, 10:37 AM
#94
Gets Weekends Off
Joined APC: Apr 2010
Posts: 696
One can argue until the end of time about asset allocation, fees and the wisdom of passive vs active investing but in this specific case, over this specific timeframe and in this volatile bull market that $$ has outperformed any broad stock index by a comfortable margin, at the cost of 1.5% in active fees (which go beyond just allocating the assets) i.e., so far it's been well worth it.
Plus I loosely mirror those allocations in my PRAP, which means those stocks (which as of a few weeks ago, cost $0 to trade) are not exposed to any fees at all - a plus vs any ETF or mutual fund now... legit zero cost and you could argue that effectively lowers the percentage cost of the external service. I wonder if Schwab and others will now bump up other fees in funds, etc, to make up for the free trading?
Time will tell how a bear market may change my opinion but I think we're prepared/positioned for it and will react better to it than I might on my own. I'll know it's worked well or poorly in a few decades I suppose - or earlier in theory since if you approach your goal "number" early and you're not a big gambler you can start locking in some of those gains and shift more conservative.
In my case I had spent a few years attempting to read every new article that the standard websites and magazines spew out, applying my "stayed at a Holiday Inn Express" level of knowledge to retirement investing building a cookie cutter "3 or 4-fund" passive low-fee portfolio that you "only need to rebalance twice a year". Ultimately I left a lot of potential market gains on the table and probably had a ratio good for a mid-50yo but was 20ish years shy of that. Learning in real time sucks sometimes.
YMMV but as a pure passive play I think the target date funds are reasonably and adequately effective and are the only true "hands-off" option. Beyond that, if you're comfortable riding some significant ups and downs and put in significant time, there are plenty of ways to build a stock or ETF portfolio - just a lot of pitfalls (and sweat equity) to it. There are some plusses to owning a bunch of individual stocks and not just buying the entire breadth of the index. Or just leave it to a professional, but one you trust - easier said than done sometimes.
12-15-2019, 12:00 PM
#95
Gets Weekends Off
Joined APC: Dec 2008
Position: 777 Cap
Posts: 199
The frame of reference is key. And time frame also. I've been working for the past few years w/ an individual I trust for taxable and Roth $$ outside of my 401k.
One can argue until the end of time about asset allocation, fees and the wisdom of passive vs active investing but in this specific case, over this specific timeframe and in this volatile bull market that $$ has outperformed any broad stock index by a comfortable margin, at the cost of 1.5% in active fees (which go beyond just allocating the assets) i.e., so far it's been well worth it.
Plus I loosely mirror those allocations in my PRAP, which means those stocks (which as of a few weeks ago, cost $0 to trade) are not exposed to any fees at all - a plus vs any ETF or mutual fund now... legit zero cost and you could argue that effectively lowers the percentage cost of the external service. I wonder if Schwab and others will now bump up other fees in funds, etc, to make up for the free trading?
Time will tell how a bear market may change my opinion but I think we're prepared/positioned for it and will react better to it than I might on my own. I'll know it's worked well or poorly in a few decades I suppose - or earlier in theory since if you approach your goal "number" early and you're not a big gambler you can start locking in some of those gains and shift more conservative.
In my case I had spent a few years attempting to read every new article that the standard websites and magazines spew out, applying my "stayed at a Holiday Inn Express" level of knowledge to retirement investing building a cookie cutter "3 or 4-fund" passive low-fee portfolio that you "only need to rebalance twice a year". Ultimately I left a lot of potential market gains on the table and probably had a ratio good for a mid-50yo but was 20ish years shy of that. Learning in real time sucks sometimes.
YMMV but as a pure passive play I think the target date funds are reasonably and adequately effective and are the only true "hands-off" option. Beyond that, if you're comfortable riding some significant ups and downs and put in significant time, there are plenty of ways to build a stock or ETF portfolio - just a lot of pitfalls (and sweat equity) to it. There are some plusses to owning a bunch of individual stocks and not just buying the entire breadth of the index. Or just leave it to a professional, but one you trust - easier said than done sometimes.
One can argue until the end of time about asset allocation, fees and the wisdom of passive vs active investing but in this specific case, over this specific timeframe and in this volatile bull market that $$ has outperformed any broad stock index by a comfortable margin, at the cost of 1.5% in active fees (which go beyond just allocating the assets) i.e., so far it's been well worth it.
Plus I loosely mirror those allocations in my PRAP, which means those stocks (which as of a few weeks ago, cost $0 to trade) are not exposed to any fees at all - a plus vs any ETF or mutual fund now... legit zero cost and you could argue that effectively lowers the percentage cost of the external service. I wonder if Schwab and others will now bump up other fees in funds, etc, to make up for the free trading?
Time will tell how a bear market may change my opinion but I think we're prepared/positioned for it and will react better to it than I might on my own. I'll know it's worked well or poorly in a few decades I suppose - or earlier in theory since if you approach your goal "number" early and you're not a big gambler you can start locking in some of those gains and shift more conservative.
In my case I had spent a few years attempting to read every new article that the standard websites and magazines spew out, applying my "stayed at a Holiday Inn Express" level of knowledge to retirement investing building a cookie cutter "3 or 4-fund" passive low-fee portfolio that you "only need to rebalance twice a year". Ultimately I left a lot of potential market gains on the table and probably had a ratio good for a mid-50yo but was 20ish years shy of that. Learning in real time sucks sometimes.
YMMV but as a pure passive play I think the target date funds are reasonably and adequately effective and are the only true "hands-off" option. Beyond that, if you're comfortable riding some significant ups and downs and put in significant time, there are plenty of ways to build a stock or ETF portfolio - just a lot of pitfalls (and sweat equity) to it. There are some plusses to owning a bunch of individual stocks and not just buying the entire breadth of the index. Or just leave it to a professional, but one you trust - easier said than done sometimes.
Most of the Professionals found at the Retail level are strictly salesman selling products.
Their knowledge is secondary to their sales experience and ability to close.
12-15-2019, 01:26 PM
#97
Gets Weekends Off
Joined APC: Apr 2015
Posts: 491
Its all a scam.
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