Naturally, we are creatures of habit. And we are familiar with the phrase, "if it ain't broke – don't fix it!"
What would cause me to go to all the trouble then, of switching brokerages and switching my investments? That just seems like a lot of hassle. I learned some things. Specifically, I learned about the power of compounding and just how much money could be lost from my future retirement through owning expensive funds. Forbes March issue illustrated this point by comparing the difference of expense ratios between EEM (0.78%) and VWO(0.27%). 
"Spend half a percentage point a year too much managing your money and you will, with compounding, drain away 14% after 30 years. If your ending stake would have been $1 million, you've wasted $140,000. You could get a nice car with that kind of money."Yikes!
Pain is a powerful motivator. When the pain of the same is greater than the pain to change, new growth can occur. Below I have tabulated the expense ratios for the 25 iShares ETF's that Fidelity is offering commission free when you trade them online.
| U.S. Equity Index Funds | Symbol | Yield | Expense Ratio |
| S&P MidCap 400 Index | IJH | 1.25% | 0.21% |
| S&P MidCap 400 Value Index | IJJ | 2.00% | 0.28% |
| S&P MidCap 400 Growth Index | IJK | 0.60% | 0.25% |
| S&P SmallCap 600 Index | IJR | 0.97% | 0.20% |
| S&P SmallCap 600 Value Index | IJS | 1.56% | 0.25% |
| S&P SmallCap 600 Growth | IJT | 0.38% | 0.25% |
| S&P 500 Value Index | IVE | 2.54% | 0.18% |
| S&P 500 Index | IVV | 1.94% | 0.09% |
| S&P 500 Growth Index | IVW | 1.40% | 0.18% |
| Russell 1000 Index | IWB | 1.95% | 0.15% |
| Russell 1000 Value Index | IWD | 2.35% | 0.20% |
| Russell 1000 Growth Index | IWF | 1.40% | 0.20% |
| Russell 2000 Index | IWM | 1.14% | 0.24% |
| Russell 2000 Value Index | IWN | 1.78% | 0.33% |
| Russell 2000 Growth Index | IWO | 0.50% | 0.25% |
| Russell 3000 Index | IWV | 1.84% | 0.21% |
| International Equity Funds | Symbol | Yield | Expense Ratio |
| MSCI ACWI Index | ACWI | 1.34% | 0.35% |
| MSCI EAFE Index | EFA | 2.74% | 0.35% |
| MSCI EAFE Small Cap Index | SCZ | 2.36% | 0.40% |
| MSCI Emerging Markets Index | EEM | 1.49% | 0.72% |
| Fixed Income Funds | Symbol | Yield | Expense Ratio |
| Barclays Aggregate Bond | AGG | 3.80% | 0.24% |
| Barclays TIPS Bond | TIP | 4.09% | 0.20% |
| iBoxx $ Invest Grade Corp Bond | LQD | 5.41% | 0.15% |
| JPMorgan USD Emerg Markets Bond | EMB | 5.64% | 0.60% |
| S&P National AMT-Free Muni Bd | MUB | 3.59% | 0.25% |
| Previous Personal Investments | Symbol | Yield | Expense Ratio |
| Fidelity Growth & Income | FGRIX | 0.72% | 0.78% |
| Ivy Science & Technology A | WSTAX | 0.00% | 1.50% |
| Ivy Global Natural Resources A | IGNAX | 0.00% | 1.40% |
| Ivy Small Cap Growth A | WSGAX | 0.00% | 1.71% |
| Ivy Core Equity A | WCEAX | 0.21% | 1.46% |
Morningstar ran an interesting article examining Fidelity's motive for offering commission free ETF trades.
Regardless, "if investors choose to use Fidelity's platform for both their "core" and "explore" portfolios using ETFs, it looks like investors will still be getting a great bargain."
Regardless of where you decide to invest it is important to remember that commission costs are a very important part of the investing equation.
GetRichSlowly had a guest post from Adam where he talks about how he keeps hanging on to his old bank even though he doesn't like it all that much. What does it take to make you change?
I think the answer to that question is when the pain of the same becomes greater than the pain of the change.
Take a look at your current investments and your current broker. Are you happy with either? Have you been fantasizing about a different brokerage? If so, then take a second to look at your current commission costs, expense ratios, customer service, etc. and run the calculations to find out which nice car you won't get to drive in retirement. It just might be the motivation you need.
No comments:
Post a Comment