I wonder if they have such soul-searching about these matters when they try to improve blocks in Detroit....
@stuffisthings Employment for employment's sake should not be a goal. Policies like that hastened the demise for the Soviet Union.
@Human Centipaul Capital that chases inefficient returns is capital destroyed. Capital that built a house built on speculation was destroyed. Lets look at it another way. Long term, if money just plows into large companies with limited good projects or growth prospects, that money won't grow. It will just sit on the balance sheet, not earning. It will not keep up with the pace of inflation.
@stuffisthings You periodic reminder that Spaniards are among the most unproductive workers in the EU: https://stats.oecd.org/Index.aspx?DataSetCode=LEVEL
@Human Centipaul An index fund is an investment vehicle, just like any other. It is subject to liquidity concerns in times of market stress, possible manipulation by outside forces, and the occasional event that one can not forsee. The 1987 crash was exacerbated by portfolio insurance, a concept so simple "everyone was doing it". The latest time of market stress saw some very large money market funds (the safest of the safe) threaten to break the buck. And, if you want to get into some true philosophical debates about money and efficiency of capital, putting money in index funds just rewards companies for being big. Bigger companies get bigger weights in the index, and see their stock pushed higher. They get lower cost of borrowing, regardless of if they have any good ideas left. In theory, this money comes at the expense of smaller firms with good ideas. The capital markets, when conducted correctly, allow good ideas to be funded by outside capital. Sooner or later, when the flow of capital deviates from this pattern, the market corrects itself, sometimes violently. Think of the tech stock crash - money was chasing dumb projects like Pets.com. Think the housing crash - people were putting money behind a $700,000 condo on the swampy outskirts of Miami.
@jfruh No, the system doesn't work. Some of the rules changed in July 2013 to promote fee transparency. Like a lot of regulations recently drafted, they had unintended consequences…part of those being recordkeeping fees getting wrapped up in the other administrative fees that are the true “hidden fees”.
@jfruh Your money has been thrown into a co-mingled investment pool with other people's money. You, in return get shares in the fund. The money is then invested in one giant master account. It buys stocks, bonds, frozen orange juice futures. At the end of each quarter, the average amount of assets in the fund master account is calculated. So, let's say that the master account has $1,000,000 value on average, over the quarter. At 0.90%, for the quarter of the year, the calculation would be (0.9%/4)*1000000= $2250. That $2250 goes to the fund management company. The master account has $997,750 left. You have the same number of shares that you did before, but they are worth 99.77% what they were before the fee was taken out. This isn't going to appear as a line item on your statement because it isn't an individual account transaction. You did not buy or sell shares of the fund. Those shares just changed value. This isn't a "hidden fee", because if you read your fund prospectus(and you should, even for index funds), it lays out the management fee amount and schedule.
@jfruh Target date funds, on average charge around 0.9% of assets in management fees per year. The issue with target date funds is that often you don't know what is in them, and if it matches your risk tolerances. If you started saving for retirement later in life, you could still be seeking to grow you assets at a quicker rate than someone that wasn't. Or, you can have no risk tolerance at all. As for that $3 categorized fee, that sounds unusual. Call up the plan provider and ask them. They should be able to give you a plain English answer right there. And, as the old saying goes, never put all your eggs in one basket, even if they tell you they are properly taking care of them. Do some research on your other options, and maybe choose a couple, just to play it safe.
@Lily Hudson@facebook There are no such thing as a "no-fee index fund". Even Vanguard's S&P 500 Index fund has about 0.05% to 0.17% in assets taken each year in fees, depending on the share class. Your next question should be - "How much a year is the person investing me in the index funds charging me"? You could, in effect, have the same fee load as an actively managed mutual fund, and maybe not even getting the same level of expertise or service. Investing in just index funds or what sounds like enhanced index funds by the description is in effect making macro calls on the economy, and investing that way.
@charo No, I am not a financial advisor. I work in a different part of the industry.