The True Cost of Actively Managed Mutual Funds (according to Vanguard founder John Bogle)
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- Опубліковано 28 лип 2021
- The True Cost of Actively Managed Mutual Funds (according to Vanguard founder John Bogle)
Actively managed funds are expensive. And it's not just the expense ratio. From transaction costs to tax inefficiencies, and cash drag to load fees, the cost of actively managed funds all but guarantee they will underperform an index fund over the long-term.
In this video we take a look at a portfolio sent in by a viewer. The portfolio was recommended by PNC Bank. For just a $100,000 account, they recommend almost 20 funds, many with expense ratios over 1.00%. On top of that, PNC wanted to charge 1.24% to manage this mess.
Resources mentioned in the video
John Bogle's article: johncbogle.com/wordpress/wp-co...
Personal Capital: go.robberger.com/personal-cap...
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Morningstar: go.robberger.com/morningstar/...
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1️⃣ 3-Fund Portfolio: bit.ly/3yT6hmO
2️⃣ Merriman Ultimate Buy & Hold Portfolio: bit.ly/3g9qtse
3️⃣ Ray Dalio All Weather Portfolio: bit.ly/3cbzdwF
4️⃣ Warren Buffett Portfolio: bit.ly/3pdI8mm
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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Took ours out of an “actively managed” fund and into Vanguard. Best decision of my life!
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The financial services industry, financial advisors, financial press and magazines don’t reveal the true cost of actively managed funds. Thanks for your honest insightful video and the Bogle article. I am one of your international subscribers from the UK.
Love your channel. I’m not sure how I found you, but I’m so glad I did!
I really like your channel. Great information and presentation. Like a good wine your content has balance.
Thank you for this video. It explains a lot to me that I didn’t know.
The length of your videos is fine. Thank you
Thank you so much for explaining the expense ratios
I had no idea that those tiny fees over 30 years could add up to 1/4 million dollars or more
Looks like an Edward Jones portfolio.
Great video. Thanks for sharing
Bogle heads would never fall for these mutual fund grifters.
Great Video
Massive Fan. Great analysis. Simple.
Awesome video!!!
Bob, you are deadly with your information. The next time I have someone advocating managed funds, I'm going to point them to your videos.
I like to see things myself so I manually calculate my own returns occasionally. That’s how I know my VOO had higher returns than my FXAIX in the past two years. Both holdings are the S&P500. Of course their percentages of individual companies too.
Hi Dave
The trlgx is one of only 2 sound large cap options in my 401k, but it has a 0.56% exp ratio. Has significantly outperformed s&p500, but the other sound equities option (fidelity 500) has a 0.08% expense ratio.
Don't know what to do.
Can you do a review of a portfolio that consists of EU domiciled ETFs and mutual funds?
I call this the logarithmic straight line portifolio (because it looks much like a diagonal straight line in logarithmic)
10% (gold) IAU
30% (tresury 20+) TMF
10% (tresury 3-7) TYD
30% (nasdaq100) TQQQ
20% (mid cap) UMDD
Rob, Love this play list. Very helpful information. I have tailored my portfolio after David Swenson's portfolio. Would love to hear your opinion on this.
Roth IRA
BND 13.50%
SCHP 14.73%
VGSH 1.95%
VNQ 15.67%
VTI 27.86%
VWO 1.73%
VXUS 14.46%
SPAXX (Money Market) 10.11%
Rob, i don't see a 'Shared Fee Structure' in portfolio visualizer? Maybe only avail in the paid version? Thx
You might be right. I do have the paid version.
I love your content. I am mainly an index investor, however, I would like to own a few individual stocks. Can you recommend a few that I consider. I am mainly looking for growth?
VGT, VUG
I never understood the purpose of putting cash "inside" a portfolio. Why wouldn't you just keep cash in your own savings account? Is there some tax benefit or something?
The only reason to do that is in anticipation of a market dip, so you can pounce faster.
What would you consider a low cost ETF index fund? How would you justify an expense ratio above let say 0.20%?
For the most part I wouldn't go above 20 basis points. Perhaps for a specialized fund, such as micro cap or some type of emerging market fund, but I don't feel the need for these types of investments.
@@rob_berger Most of my $$ is at T. Rowe Price and American Funds at approx. .60% ER. In trying to determine whether it makes sense to move those to Vanguard and .04 is it just a matter of comparing the LTCG hit I'd take to the savings realized over time by the move? I'm 56 yrs old so only a 9 yr horizon. I realized 1.0% ER is high but didn't think .60% was awful ... until I saw your comment. Thanks
Can you do a video on Cathie Woods ARK ETFs?
ua-cam.com/video/Y6hKgaZpA4U/v-deo.html
You are not throwing away money, you are buying a service right?
👍👍👍
I understand the business case for ETFs. However, all my analysis using select American Funds (including Portfolio Analyzer) shows these managed funds out performing Vanguard ETFs. Am I missing something? Use $1,000,000 and funds in IRA (no taxes). No fees above expense ratio (about 0.68%). No trade cost. No sales fee. Compare:
American Fund Vanguard
50% AMCAP VTI
25% ANWPX VXUS
20% ABALX VWELX
5% SMCWX VTWG
Secondly, I fully understand looking back index funds as a rule kill managed. However, looking forward I'm predicting a shift due to the ability to pick winners in this time of COVID, rapid technology growth and innovation. For example: Airline stocks, Entertainment stocks, REITS.
Past performance is not indicative of future results. In my comparison of VTI vs AMCAP, the difference was minuscule, and I'd bet that VTI will soon outpace AMCAP due to the high expense ratio of AMCAP. AMCAP has only been around since 2001; you can also make the argument that the Nasdaq 100 (QQQ) would be better, as this ETF was launched around the same time. Hindsight is always 20/20, but high cost mutual funds more likely than not will underperform in the long run.
Edit: I'd also like to add that AMCAP is not at all a bad fund, and if it's the only thing your employer has available then I wouldn't be too disappointed.
@@nvass99 Thanks for comment. Do you have any thoughts on the next 10 years being the decade of managed funds? There are easy losers coming out of covid, the tech boom, and innovation. Half the S&P is losing money. Like you said, past performance…….
I am owing 5 AM Funds too and they are doing great comparing to the benchmarks.
@@baybay7898 agree. New Perspective is killing it.
@@joekuhnlovesretirement One of the concerns with indexing is that if too many people do it, then active management will become more prevalent; although this is usually temporary. Fund managers that outperform are either lucky or do so temporarily. This can be seen with Cathie Wood’s ARKK; sure the fund has performed tremendously as of late, but in the long run it will likely underperform.
Good content, but way too long. Rehearse and condense
I agree with you…….it was almost 9 minutes before the Boyle paper was shown. I have tried listening to several of his videos and found them to be too long before he got to the meat of the matter. Hence I haven’t subscribed. I thought it was only ME!
please consider shortening your videos to under ten minutes. like your content but not always able to watch from start to finish
In the player's Settings you can increase playback speed.