Wednesday, September 23, 2009

A simple plan.

Today we will look at two investing companies and two nearly identical investment plans that only involve four funds. Yes, that's right, four funds. Investing does not have to be complicated! Let's sample each companies low cost funds.

Fidelity is a company you may have heard of. They are a privately held investment firm. They have an excellent website for the new investor that allows you to try many options and retirement type calculators.

Here is a sample portfolio using four of their low cost mutual funds.

Spartan Total Market Index (STM)
Fidelity Total Bond Fund (TBF)
International Enhanced Index (TINT)
Inflation-Protected Bond Fund (INFL)

The first row is the weighting, or the percentage of the fund in this sample portfolio.
The second row is the abbreviation for the fund.
The third row is the expense ratio, or cost as a percentage, for the fund.

40% 25% 20% 15%
STM TBF TINT INFL
0.10% 0.45% 0.63% 0.45


I really like looking at Vanguard's site. If you are not familiar with Vanguard, they have been around for a long time, and are famous for forcing mutual fund and investing costs down overall.

Let's take a look at a sample portfolio using Vanguard's low cost funds.

Total Stock Market Index (TSM)
Total Bond Market Index (TBM)
Total International Stock Index (TINT)
Inflation-Protected Fund (VIPSX) -- actual "ticker" symbol (for the NASDAQ)

The first row is the weighting, or the percentage of the fund in this sample portfolio.
The second row is the abbreviation for the fund.
The third row is the expense ratio, or cost as a percentage, for the fund.

40% 25% 20% 15%
TSM TBM TINT VIPSX
0.18% 0.22% 0.34% 0.25%

Now with these two examples, you can see some differences in costs. The Spartan fund family from Fidelity has a high minimum investment amount compared to Vanguard's funds. The minimum for the Spartan funds is $10,000 while the Vanguard funds require $3,000. That is a lot of money. But up next time, we will look at short term solutions for saving enough money to put into a fund, and other options that will allow you to "chunk" your money into investments.

Disclosure: The author does not own any of the funds listed, but someday hopes to.

1 comment:

  1. This is great! Makes a lot of sense, you make it easy to follow along =D

    Vanguard = awesomeness ;-)

    ReplyDelete