SPIVA

[vnatale]

I am presently reading in full Craig and Tex's book for at least the third time this year.

This time I am doing further searches on certain issues they refer to in the book.

The last search let to this wonderful article: SPIVA: 2018 Active vs. Passive scorecard https://www.ifa.com/articles/despite_br ... d_-_works/

Not long ago I wrote here that I was researching various retirement plans options for the organization that employs me. Just a few days ago we decided to initially go with a SIMPLE IRA with Vanguard. It allows one to choose any Vanguard fund available to a retail investor (with the bonus that the minimums are waived for Admiral funds).

I don't think I'm going to need any more than the above article to convince our future plan participants (implementation date - January 1, 2020) to avoid managed funds and just use index funds (just like I have been brainwashed to do for about the last 20 years).

Vinny

[europeanwizard]

Wow, that's pretty good news! Were the people in your organization happy? I mean, I bet you are going to save them a lot of money.

[vnatale]

Wow, that's pretty good news! Were the people in your organization happy? I mean, I bet you are going to save them a lot of money.

Most of them are either non-investors or not that experienced investors so I don't think they yet realize how good it is to be able to invest with Vanguard rather than the other possible options.

But there was a specific downside with the Vanguard SIMPLE IRA compared to a 403(b) and 401(k) options, both of which also had access to the Vanguard funds.

There were fees associated with both of those but the organization could choose to pay for all of them and NOT pass on any to the employees.

With the Vanguard SIMPLE IRA, unless you are a Vanguard investor with $50,000, each employee / participant get charged $25 a year for each fund used in their SIMPLE IRA account. Thus, if one uses 4 funds one will be charged $100.

$100 may not sound like a lot but if one is just starting investing with Vanguard in this SIMPLE IRA it IS a (too) high percentage (and, counter to the Vanguard mantra of "low fees").

Therefore, we will try to encourage participants starting with small account balances to only choose ONE fund, such as the Target Date funds or the LifeStyle funds, both of which are funds of funds. This would minimize their annual fee to just $25 yet still get some diversification via those funds of funds.

Vinny