Once the expense ratio is "low enough" is just doesn't matter.I use Schwab. What about spy snp? Expense ratio is 0.09%... is that too high? Are the others lower, mentioned in this thread?
To illustrate, assume you are investing $10,000 in some mutual fund (it can be an S&P500 mutual fund).
Maybe you expect, on average, the return to be 7% though with a lot of variation and a number of
years the fund will actually go DOWN for that year.
Still, lets assume 7%.
7% of $10,000 is $700. For a typical year (again, with lots of exceptions both higher and lower) the fund
starts the year off at $10,000 and finishes at $10,700.
With an expense ratio of 0.01% the fund manager will charge you $1 to manage the fund so the $700 return will actually be $699.
With an expense ratio of 0.02% the fund manager will charge you $2 to manage the fund so the $700 return will actually be $698.
:
With an expense ratio of 0.09% the fund manager will charge you $9 to manage the fund so the $700 return will actually be $691.
With an expense ratio of 0.1% the fund manager will charge you $10 to manage the fund so the $700 return will actually be $690.
With an expense ratio of 0.2% the fund manager will charge you $20 to manage the fund so the $700 return will actually be $680.
:
With an expense ratio of 1% the fund manager will charge you $100 to manage the fund so the $700 return will actually be $600.
All mutual funds are NOT managed equally well so below an expense ratio of around 0.1% I don't think it matters too much because manager skill (which is VERY difficult to determine at this level of sensitivity) matters, too.
Statistics: Posted by MarkRoulo — Sat May 11, 2024 12:46 pm
