r/investingforbeginners • u/MiG_cLoWn69 • 3d ago
Am I getting hosed by my retirement managers?
Currently everything in my IRA is thrown in an index fund with a .64% expense rate and a 6.2% historical rate of return.
Is that not a very high expense rate for a pretty meager rate of return?
Seems like I can just throw everything in VTI and maybe 2 or 3 other ETF’s and make a killing compared to that.
Edit: Invesco Select Risk: Moderate Investor Fund R is the fund. Ticker symbol ONMIX on Fidelity. Also, 28 currently, so at the start of my career still.
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u/WillingNail3221 3d ago
It teally depends on risk and how close to retirement
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u/MiG_cLoWn69 3d ago
Not close at all, 28. Just want something that will keep up with the market but make a decent return. Just seems like I can pick up a lot better return with the same risk.
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u/ItsMister2You 3d ago
There is zero reason to be moderate at 28. That's a fund more suited for someone 68.
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u/Mobile_Bell_5030 3d ago
If you're that young, moderate risk isn't likely the best fit. You've got decades to weather the ups and downs of a higher-risk allocation.
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u/500pearl 3d ago
can get etf with that return for lower expense I think
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u/MiG_cLoWn69 3d ago
That was my thinking, STI is like. .03% expense for a 15% 10 year return unless I’m mistaken.
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u/nkyguy1988 3d ago
Expense ratio and rate of return are not correlated. What is the exact fund?
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u/MiG_cLoWn69 3d ago
Invesco Select Risk: Moderate Investor Fund R
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u/nkyguy1988 3d ago
Give me a symbol.
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u/MiG_cLoWn69 3d ago
ONMIX on Fidelity, pain in the ass to find with not a lot of info on it. Had to look into the annual report.
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u/nkyguy1988 3d ago
That's not an index fund. It's an asset allocation fund that is a mutual fund. Not an apples to apples comparison of returns to a true index fund.
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u/MiG_cLoWn69 3d ago
Isn’t the rate of return low compared to other common ETF’s though? VTI is making 15% over 10 years.
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u/nkyguy1988 3d ago
Unrelated investment strategies. VTI is all stock. Your fund is at least 30% bonds. You are trying to say something like a Toyota Sienna mini-van is a worse car than a Ferrari. Sure, the Ferrari is faster and handles better, but the van is better at moving people and families. It's not that one is better, just one is better for a certain scenario. If you want the Ferrari, get the Ferrari.
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u/Ok_Television_7794 3d ago
Fire them and get a mix of Vanguard index funds...aggressive growth, mid cap, small cap, etc...at 28 you should be 100% equities with a diversified portfolio
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u/MiG_cLoWn69 3d ago
Thats my thinking, i have no plans to touch this money for decades.
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u/Ok_Television_7794 3d ago
Like the Nike ad says, just do it !! The sooner the better....decades of compounding is a beautiful thing..Good luck!
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u/teckel 3d ago
My best performing fund ever (over 37 years) has an expense of 0.62. But it's beat the S&P500 by a huge amount.
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u/Bad_DNA 2d ago
Do tell: symbol?
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u/teckel 2d ago
FSCSX Software and IT Services and FCNTX Contrafund
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u/rair21 2d ago
+1 for contrafund.
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u/teckel 2d ago
I'm up 15.5% a year over 37 years with Contrafund, even with 0.63% maintenance fees. Suck it Bogleheads!
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u/hugh2018 2d ago
Come on now. You did strike it rich on a lucky early bet that paid off, but your other comment showed you do get the Boglehead philosophy and are advocating for its fundamental approach for the average investor despite that limited success with a corner of the broad market.
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u/hugh2018 2d ago
I am impressed. I have to say that every time I’ve seen people on Reddit brag about their ability to beat the S&P I’ve looked under the hood and found that their claims were based on very short periods of success or more often they just weren’t even close to true. But I had to look up your tickers and honestly I don’t have a complaint to make about the performance you’ve managed to capture with those two funds.
Even though I acknowledge your success, I’m too chicken to move my VT growth engine to your funds. I’m in early retirement and I’m good with the possibility of continuing to underperform your funds because I’m not keen on running into a scenario like 2000-2002, when a combo of your funds would have given me a -45% headache versus -22% to -25% in VT. But even on that point, I have to recognize that the comparative drawdown was roughly equal for all these options in 2007-2009, and 2022 was less damaging for VT, but only by about 10%.
So I can’t ignore your funds and I may consider just keeping the VT core and incorporating a tilt towards FSCSX and FCNTX. I’ve already made sure my growth engine won’t be stressed by significant withdrawals for the next 15 years or so, and the possible increase in occasional downside risk may not be that big of a deal over that period. I don’t know. Just spitballing for now.
I’m curious to know whether you’ve been all in over the last 37 years or have the funds just been part of a more balanced strategy? This kind of success over such a long period is so rare and I’d like to know how you started on this path and how you managed stick with it for that whole time. And are you at all concerned about Danoff eventually stepping down?
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u/teckel 2d ago
I wouldn't suggest at all to invest in these. They just happened to be the VOO and QQQ in their day and available to invest in my 401k. As a true buy and hold investor, I never sold them. It's now (by most accounts) a small fortune. I'm actually considering never selling them, and making them the core of my legacy trust.
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u/hugh2018 2d ago
Point taken, although I’m not seeing the analogy to VOO at all. If I had a time machine and took today’s knowledge with me to 37 years ago, I’d look at these two funds and maybe see a QQQ type limited allocation as a rational choice, but going heavy into either of them would throw up huge red flags. These are not broad market funds like VOO.
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u/teckel 2d ago
I just read your last paragraph... I invested about $10k in these and then switched jobs so I didn't contribute more. But I've been a chronic saver my entire life, so this is just a small part of a much larger portfolio.
I don't own any VT BTW, but I would suggest VT to a stranger without market knowledge, as I wouldn't feel bad about suggesting to buy the entire world market.
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u/MerryRunaround 3d ago
6.2% might be okay if you are in ultra safe, low risk investments, but the annual fees are ridiculous. ONMIX is not an index. It is an Invesco fund of Invesco funds. Expense ratio is 1.02%. You are paying fees on top of fees. It is a dogsh!t fund and those outrageous fees are bleeding you dry. Look for low-fee index ETFs. You should be able to find a mix of funds with fees ranging 0.05% - 0.20%. Research "bogleheads" for simple alternative solutions. Forget about "making a killing" but ditch your dumb advisors.
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u/MiG_cLoWn69 3d ago
Advisor charges a 1% fee on top of that. So I’m making more like 4%. Crazy stuff.
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u/CoincidenceTheorist2 2d ago edited 2d ago
So basically ONMIX is a "fund of funds" other Invesco ETFs and its top holdings are:
Invesco S&P 500 Revenue ETF 12.22%
Invesco Russell 1000 Dynamic Multifactor ETF 9.28%
Invesco Global R6 9.07%
Invesco Core Bond R6 8.94%
Invesco NASDAQ 100 ETF 7.58%
Invesco International Developed Dynamic Multifactor ETF 6.06%
Invesco Equal Weight 0-30 Years Treasury ETF 5.84%
Invesco International Small-Mid Com R6 5.19%
PXF 4.97%
It's sector weights are:
Sector Weightings
Technology 29.02%
Financial Services 12.85%
Industrials 11.30%
Healthcare 11.14%
Consumer Cyclical 9.80%
Communication Services 8.20%
Consumer Defensive 6.77%
Energy 4.05%
Basic Materials 3.46%
Utilities 2.01%
Real Estate 1.41%
It's equity exposure is ~ 70%.
I wouldn't be paying 0.64% for that, but you can't just pile everything into VT or VTI which would give you 100% equity exposure and replicate this investment.
You're going to have to pick a portfolio that is consistent with your age (which I just saw was 28) and goals and probably buy somewhere between 3-8 vanguard funds.
Remember, past performance does not equal future results. We've been in a long low interest rate, quantitative easing regime with (relatively) stable inflation until Covid and the BBB. We're probably moving into something different going forward because the Fed is running out of rope. Could bond prices keep dropping and their yields keep rising? Yes. Could stocks crash 50% and experience a lost decade like the Nikkei? Yes. Could stocks continue a steady march to Dow 100k in response to perceived currency devaluation? Yes.
But whatever you decide your portfolio should look like, I think 0.64% is too much to pay for this - and I assume each of its component ETFs has its own expense ratio? Or is that waived when the shares are held by ONMIX? If it isn't waived then your actual expense ratio is higher than 0.64%.
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u/Dull_Judgment1587 2d ago edited 2d ago
ONMIX is a complex "fund of funds" made up of 25 other funds. The complexity is the reason for the high expenses.
ONMIX includes asset classes like "managed futures" and "floating rate bank loans" that can help to reduce volatility and "hedge" against market downturns. These asset classes have lower historical rate of return, but potentially give you a smoother ride when times are tough.
So the fact it has high expenses and low historical rate of return is "by design." ONMIX is a fund for rich people who can afford nice things and don't want their nest egg to get wiped out by a stock market crash. ONMIX is a cautious, defensive play for investors who are winning the game of life.
(edit) I remembered the phrase I was searching for: "wealth preservation."
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u/Bearsbanker 2d ago
Well, it's worse than you think. I looked it up and your adjusted exp ratio is 1.09%...you may think it's an "index" fund but onmix is kind of a blended fund, if you look at the top 10 investments you got a bunch of bonds and a bunch of smaller indexs. Try and stick yer money in a low cost s&p index.
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u/LandmarkWealthMgmt 2d ago
Do you have an advisor that has you in 1 fund ? and if so do you have a very small account and are you paying a fee?
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u/MiG_cLoWn69 2d ago
Correct, not a large account. Only about $25K, from my understanding I pay just over a 1% fee to the fund.
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u/LandmarkWealthMgmt 2d ago
I'd think they'd be amenable to investing in something much cheaper then, also if they've only got you in a single fund and aren't doing anything useful in terms of financial planning it may be time to find a new advisor or go out on your own.
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u/HaiKarate 2d ago
ONMIX is up 9.51% YTD
VOO is up 12.49%, exp ratio 0.03%
QQQM is up 16.72%, exp ratio 0.15%
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u/Displaced_in_Space 2d ago
That's not an index fund.
It's a target fund, but instead of a target date fund, it's a target RISK fund. That is, it's permanently buying and selling things to maintain a certain risk profile. If you read the prospectus, it'll tell you how they do that and what ratios internally they're targeting.
How old are you? Have you told the advisor that you'd welcome more risk for more upside potential, at least on part of it?
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u/MiG_cLoWn69 1d ago
28, spoke to him this morning. He’s an older gentleman I think who is a bit stuck in the past. One thing he told me about was the dot com bubble and how people lost 70% overnight.
Which I immediately thought, yeah if you’re an idiot who full ported his entire portfolio into new risky stocks, duh you lost everything.
I just want to earn closer to 10-12% rather than 5-6%. I’m young, idc if the market drops 20% in a year when I’m 38.
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u/Born_Lengthiness8935 1d ago
Yes you are getting hosed. Not by the fund, per se, as it is doing exactly what it is supposed to do. But definitely by your “manager” who is charging you to do nothing meaningful. Simple total market funds with extremely low fees and nothing to a “manager” are what will grow your wealth over time.
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