Beruflich Dokumente
Kultur Dokumente
Tips,trends,everydayproducts
at 9 percent annually over 20 years, $10,000 invested with Nationwide would grow to $53,847, compared with just $42,358 with ING, a difference of $11,489. Net expense ratios are only part of the picture. Trading fees could add 1 percent to what you pay, Demos says. High expenses can weaken even funds with above-average returns. A 2010 Morningstar study found that low-cost mutual funds consistently performed better than highcost funds, regardless of asset class or time period.
DIDYOUKNOW?
You can compare how expenses of two or more funds affect long-term performance with the free Fund Analyzer sponsored by the Financial Industry Regulatory Authority at apps.finra.org/fundanalyzer/1/fa.aspx.
If you have a 401(k) plan, look this summer for correspondence spelling out mutual fund expenses. By Aug. 30, thanks to a new Department of Labor rule, all 401(k) plans must give participants an easy-tofollow explanation of each funds average annual returns over one, five, and 10 years; the comparable returns of a benchmark fund; and average annual operating costs as a percentage of assets and as a dollar figure per $1,000 invested. The goal of providing that uniform data is to permit apples-to-apples comparisons. Check your quarterly statements, too. Other tips: Within each asset class (large-cap, small-cap, international), replace higher-
cost funds with lower-cost funds that have comparable portfolios. Consider index funds, which simply mirror the portfolios of broad market indices such as the Standard and Poors 500. Managers dont need to do a lot of research to pick index portfolios, so costs are low. If you want more low-cost 401(k) funds in your plan, arm yourself with comparisons and join other plan participants in asking trustees to offer those choices. Agitate for your plan to switch to a less costly share class of the same fund. Differences can be significant: Pimco Total Return bond fund, for instance, has an expense ratio of 0.46 percent for its institutional shares, compared with 1.15 percent for its retirement-class shares. If your plans choices are pricey and unlikely to change, invest the minimum needed for the full company match (typically 6 percent of your gross income, for a 3 percent match). Then put other savings in a Roth IRA composed of low-cost funds or in a traditional IRA. If youre 59 or older, you may be able to apply through your employer for an in service nonhardship withdrawal and roll over part of your 401(k) balance to a traditional IRA with more choices. Read the fine print for restrictions and penalties. july 201 2 C o n su m e r R eports . o rg
5/11/12 11:18:44 AM
Copyright of Consumer Reports is the property of Consumers Union and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.