A few days ago, I received a redesigned quarterly statement for my 401(k) account. It contains the usual sections, including a summary, transaction detail, a pie graph of my asset allocation.
It clearly stated my account performance, not including deposits as performance, for the first quarter: 3.41%.
The statement also includes for the first time the expense ratios for each fund right alongside their performance metrics. I’m mostly familiar with the fees, but only because I check the prospectuses once a year. Seeing them in front of me in one place on a statement, I was struck with the reality. The expense ratios of the funds in which I invest range from 0.50% to 1.20%.
Over the past few years, my company has decided to periodically replace individual funds with another with similar goals, holding, and investment philosophies. It’s interesting to see the “new” funds have the highest fees.
I’m considering moving everything from the individual funds to the “Core Equity Account,” a large cap index fund with a 0% expense ratio, which has performed better than all the other, more expensive large cap funds.
Currently, my 401(k) is diversified almost equally between international stocks, mid and small cap stocks, large cap stocks, and “other” (which includes company stock and real estate funds). Some of that company stock is “mandated.” Half of my company match must be invested in company stock (though it can be later exchanged — I think) and the other half currently mimics the allocation of my pre-tax contribution.
I like having the diversification, but the appeal of a 0% expense ratio is compelling.
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