When using an asset allocation strategy, cheaper is usually better.
Don't waste money on expensive financial products. Use a cheap ETF instead of an expensive actively managed mutual fund.
Watch this video to see how:
If you'd rather read than watch, here is the text version...
If you're trying to pick a certain part of you asset allocation strategy (US stocks, emerging markets, bonds, etc.), it's usually best to go with a cheaper option.
When you start looking at expenses, make sure you're comparing apples to apples.
Go to Morningstar.com. Enter the symbol of the first investment you're comparing in the "Quote" box at the top.
Open a second tab and do the same for the comparison investment.
Once you have your investment quotes pulled up, scroll down to the sections of "Style Map" and "Asset Allocation" on the right side.
This is where you can tell if two investments are similar.
Now go to the second investment you're comparing and scroll to the same sections.
Are they really similar? Yes? Then it's cool to compare expenses. If not, you'll want to find another comparison investment that is.
Now that you know you're comparing like investments, go back up to the top of the page.
You should see a bunch of numbers and info on the right side.
One section is "Expenses". For the ETF, it's all the way on the right side. For the mutual fund it's more towards the middle.
And here's a picture of that section zoomed in:
For a mutual fund, the expense will be more in the middle of this section.
Here's the picture of the mutual fund expense:
So by changing from the actively managed mutual fund to the ETF, we cut our annual product expense by 90%!
Not too shabby...
Go through all your funds and see what the expenses are. Then see if you can find a cheaper alternative to use.
I'd check your IRA, Roth, 401k and any other accounts where you have mutual funds.
Want some help? Click here to schedule a free call with me.
I'll see if I can find a cheaper option for you.
When you're using an asset allocation strategy, make sure you have the right mix of assets first. Like U.S., bonds, emerging markets, etc.
But once you get the mix right, use the cheapest investment products that meet those needs.
And don't waste your money!
Leave me a comment below to let me know if this was helpful to you.
Or ask me additional questions and I'll get you some answers.
Please log in again. The login page will open in a new window. After logging in you can close it and return to this page.