lowest expense ratios

**noppenbd** · 10-29-2008, 09:45 AM

Most of Vanguard's funds have very low ERs. Some are based on indexes, but many aren't.

For instance, VDEQX (Diversified Equity) is a blend of a few different actively managed funds and has an overall ER of .38%.

**KGeary** · 10-29-2008, 10:00 AM

Originally posted by StepRightUp View Post

Hi guys,

Aside from Index Funds, are there any mutual funds out there you know of with expense ratios below 1%?

I've tried some online research but figured I'd ask you all as well.

I've been checking out PRPFX (Permanent Portfolio) and it's at .95%. I'm considering this but I've heard some allegations that the fund manager is not invested in this fund. Should that be cause for concern?

I suppose that's two questions then.

Thanks

Most actively managed funds won't have low expense ratios. The reason index funds have low expense ratios is because they don't really need to be managed, thus they don't have to pay a manager a lot of money.

What's wrong with just investing in index funds? They usually outperform actively managed funds anyway.

**tripods68** · 10-29-2008, 10:11 AM

Agreed. Almost all of Vanguard's funds have < 1.0 expense ratio.

Consider also the history of the fund manager's experience, overlapping funds, and inception date of the fund.

As far as your last question, there is no underlying evidence to support fund managers that owns stake on funds they run beats consistently the market. But that is subject to debate.

**Broken Arrow** · 10-29-2008, 11:07 AM

The famed Magellan Fund (FMAGX) is 0.73%, and the equally famed Dodge & Cox Fund (DODGX) is 0.52% and both are actively managed. However, I agree that they are more of an exception rather than the rule. Index funds are usually the way to go for low ERs.

As for the second question, yes, some fund managers don't have any of their own money in the fund. I don't know of any numbers, statistics, or even how to find out such an information, but when you do come across it, it's worth keeping it in mind. I would feel a bit more comfortable with those that do. Or, you can also look at it as another advantage of index funds, because it essentially bypasses issues such as these.

**tripods68** · 10-29-2008, 01:09 PM

Originally posted by KGeary View Post

thus they don't have to pay a manager a lot of money.

I think you are over simplying it a bit. All fund managers compensations are tied to the performances of various funds they are managing. What seperate them from the best of the best, if they are consistently beating their benchmarks (ie, Russell 2000, S&P 500, or Wilshire 5000). Therefore, big bonuses.

At least that's how my current company pays our directors and portfolio fund managers around here. Although this year, I expect it to be a quite christmas. I repeat a VERY quite Christmas.

**MYOM** · 10-29-2008, 01:53 PM

The lowest expense ratios can be found in Exchange Traded Funds or ETFs. I like the low cost to buy and sell and I don't have to be concerned for fees for early redemption.

Dan Clemons

**jIM_Ohio** · 10-29-2008, 02:54 PM

YES you can find funds under 1%. Most T Rowe Price funds are managed and domestic funds are under 1%, some managed international funds are also under 1%.

**Broken Arrow** · 10-29-2008, 04:12 PM

Originally posted by MYOM View Post

The lowest expense ratios can be found in Exchange Traded Funds or ETFs. I like the low cost to buy and sell and I don't have to be concerned for fees for early redemption.

Dan Clemons

Please forgive me, but I think that really depends on how much your balance is and how often you are buying.

If a typical (Vanguard) passive index fund ER is, say, 0.25%, and a typical ETF trade is $15, it means the cost of the index fund is equivalent to a once-per-year ETF buy with a lump sum of $6000. $12k if you also plan to sell. That's pretty tough to beat.

lowest expense ratios