Low Cost Mutual Funds and ETFs
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\"LOW COST MUTUAL FUNDS AND ETFS\"
By Lawrence J. Russell -- MBA/Stanford, MA/Brandeis, BS/M.I.T.
THE ONLY INVESTMENT BOOK YOU REALLY NEED
Find The Lowest Cost No Load Mutual Funds And ETFs
* 212 lowest cost mutual funds in 30 categories
* 208 lowest cost ETFs in 27 categories
* A full range of lowest cost index fund alternatives for any US
investor
* Screened objectively with factors supported by academic research
Reducing Investment Costs Is The Most Powerful Strategy
* Understand why the financial industry does not earn its keep
* Cut your investment expenses and fees to the bone
The Most Durable Long-term Investment Strategy
* Keep more for your family and stop enriching the financial
industry
* Get off endless "do-this-do-that" "change-this-change-that"
financial industry hamster wheels
This Book's Table Of Contents Is Presented Below In Five Sections
* What really works in personal investing (Chapters 1 to 5)
* Excessive investment costs are your real enemy (Chapters 6 to 9)
* Selecting and buying low cost mutual funds and ETFs (Chapters 10
to 14)
* Lowest cost mutual funds: 212 funds in 30 tables (Chapter 15)
* Lowest cost ETFs: 208 funds in 27 tables (Chapters 16 to 17)
WHAT REALLY WORKS IN PERSONAL INVESTING
* Charging investors dearly for its supposed wisdom, most of the
financial industry treats people like hamsters. Investors run in
circles, as their wallets are lightened with each turn of the wheel.
* There is a better way. Low cost mutual funds and ETFs deliver
better risk-adjusted returns. After costs and taxes are taken into
account, investors simply keep more of their investment returns.
* As a bonus, investors who buy the lowest cost index funds reduce
risk, spend less effort, avoid sales pressure, experience far less
hassle, and save much more time.
* You can invest by yourself, and you can do it better. You just
need correct and truly objective information. Read these chapters for
some absolutely straight talk on what works with investing.
Chapter
Contents of Chapters 1 to 5
Page
TABLE OF CONTENTS
2
1
INTRODUCTION
7
2
PERSONAL INVESTMENT MANAGEMENT ON AUTOPILOT
11
2.1
Key investment concepts
11
2.2
The best investment strategy for individuals
15
2.3
Fifteen value-added individual investor activities
18
2.4
Passive index investment strategies are simple and superior
20
2.5
Passive investors are low cost free riders
22
3
INVESTMENT DIVERSIFICATION - NOW AND FOREVER
28
3.1
What is investment diversification?
28
3.2
Why is diversification valuable?
29
3.3
Choose the broadest whole market diversification
30
3.4
What is the cost of sub-optimal diversification?
31
3.5
Diversification and the credit crisis
33
3.6
Concentrated investments could be very bad for you
35
3.7
Measure your portfolio diversification
39
4
INVESTMENT RISK AND RETURN - UNKNOWN UNKNOWNS
43
4.1
Introduction to valuation and securities risk
43
4.2
Securities values - snapshots in time
44
4.3
The confusing securities market motion picture
46
4.4
Efficient market pricing in the securities markets
47
4.5
Whole stock market investments versus strategy skews
49
5
RISK TOLERANCE AND ASSET ALLOCATION - YOUR OWN SKIN IN THE GAME
56
5.1
Personal investment asset allocation
56
5.2
Risk tolerance drives asset allocation
61
5.3
Risk tolerance questionnaires
63
5.4
Tactical asset allocation and market timing
65
5.5
International versus US stock asset allocation
69
EXCESSIVE INVESTMENT COSTS ARE YOUR REAL ENEMY
* In a nutshell, you are a financial industry profit center. The
industry makes investing unnecessarily complicated by flooding the
market with excessively expensive products and services. Then, it
gives self-interested "free advice" on investment selection, which is
the most expensive "free advice" you will ever get.
* The more you let the industry take, the less your family will
have. Save your money and save your time.
* You do not have to play this game. Cutting investment expenses to
the bone is the most powerful strategy that you have. Chapters 6 to 9
explain why.
Chapter
Contents of Chapters 6 to 9
Page
6
ARE YOU WASTING BOTH YOUR TIME AND YOUR MONEY?
70
6.1
Passive investment strategies are more efficient
70
6.2
Your personal investment management wages
71
6.3
The wrong financial activities are bad for you
74
7
YOU ARE A FINANCIAL INDUSTRY PROFIT CENTER
78
7.1
Why allow the financial industry to help itself to your money?
78
7.2
The biggest personal finance story of the past 30 years
82
8
EXCESSIVE INVESTMENT COSTS - MEET THE REAL ENEMY
92
8.1
Cut your investment costs to the bone
92
8.2
Excessive investment costs are a huge problem
93
8.3
The lifetime penalty of excessive investment costs
94
Graphic 8.1
Projection of cumulative lifetime assets lost to excessive
investment costs
95
8.4
Lower investment expenses lead to higher returns
96
8.5
Financial industry hands constantly in your wallet
100
9
HISTORICAL FUND PERFORMANCE - USELESS AND MISUSED
110
9.1
Performance charts - How to lie with statistics
110
9.2
Do not waste time evaluating fund managers
116
9.3
Where's Waldo? - The superior manager illusion
117
9.4
Why only one Warren Buffett?
119
9.5
True investment skill versus luck
121
SELECTING AND BUYING LOW COST MUTUAL FUNDS AND ETFS
* The industry uses star ratings and historical performance charts
to reel in investors. Performance extrapolation does not work, but
stars and charts cause naive investors to buy expensive funds that
look good in the rear view mirror, but disappoint in the future.
* In contrast, academic research shows that investment management
fees, sales channel costs, and trading expenses are dominant variables
in better long-term net investment performance.
* Chapters 10 to 14 explain what objective academic investment
research has shown about fund screening and selection.
* These chapters also provide practical, do-it-yourself information
on how to invest in low cost mutual funds and ETFs.
Chapter
Contents of Chapters 10 to 14
Page
10
SEVEN RATIONAL INVESTMENT FUND SELECTION CRITERIA
127
10.1
Seven criteria to pick mutual funds and ETFs
127
10.2
Never pay sales loads or 12b-1 fees
131
10.3
Choose funds with the lowest management fees
133
10.4
Choose funds with the lowest portfolio turnover
137
10.5
Avoid large actively managed funds
139
10.6
Choose mature investment funds
142
10.7
Avoid very small investment funds
145
10.8
Screen only for significantly inferior fund performance
147
11
WHEAT FROM CHAFF - AUTOMATED FUND SCREENING
151
11.1
Scientific mutual fund and ETF screening
151
11.2
Requirements for online fund screening tools
152
11.3
Screening funds with Morningstar.com
155
11.4
Screening funds with IndexUniverse.com
159
11.5
Screening cash investment funds
162
12
BUYING MUTUAL FUNDS AND ETFS
169
12.1
Where to purchase investment funds
169
12.2
Buy mutual funds from companies doing business directly with the
public
170
12.3
Do not purchase funds through high cost channels
172
12.4
Too few low cost funds - Far too many high cost funds
174
12.5
Vanguard and Fidelity
175
12.6
Do your research - and do it BEFORE you buy
176
12.7
Buy funds only to implement a very long-term buy-and-hold-and-hold
strategy
177
12.8
How many investment funds?
178
13
BOND AND CASH INVESTMENT FUND CONSIDERATIONS
179
13.1
Bond index funds
179
13.2
Bond mutual fund fees
180
13.3
Scarce low-cost international bond index mutual funds
182
13.4
Efficient cash investments are US dollar denominated
184
13.5
Municipal bonds and marginal income tax rates
185
14
ASSET ALLOCATION, TAX LOCATION, AND EMERGENCY CASH MANAGEMENT
188
14.1
Where you hold different types of assets affects your tax bill
188
14.2
A tax location optimization example
190
Graphic 14.1
Optimal tax location within a sample portfolio
191
14.3
Emergency cash management considerations
192
LOW COST NO LOAD MUTUAL FUNDS: 212 FUNDS IN 30 TABLES
* 212 lowest cost, no load index mutual funds available to US
investors for direct purchase
* Listed no load funds have the lowest management fees, no sales
loads, no marketing charges, and lower portfolio turnover, which is a
proxy for lower trading expenses.
* These no load mutual funds are grouped into 30 categories of the
lowest cost global, international, and US stock, bond, real estate,
and money market funds.
* Easily choose a no load fund portfolio that is fully diversified
by asset class and geography
Chapter
Contents of Chapter 15
Page
15
LOW COST, NO LOAD MUTUAL FUNDS
194
15.1
Characteristics of these low cost, no load mutual funds
194
15.2
Mutual funds purchased directly from fund companies
195
15.3
GLOBAL AND INTERNATIONAL STOCK MUTUAL FUNDS
196
Table 15.1
International Multi-Cap Stock Mutual Funds with Low Costs
196
Table 15.2
International & Global Large-Cap Stock Mutual Funds with Low Costs
197
Table 15.3
International & Global Mid- & Small-Cap Stock Mutual Funds with Low
Costs
198
15.4
US TOTAL MARKET AND MULTI-CAPITALIZATION STOCK MUTUAL FUNDS
199
Table 15.4
US Total Market & Multi-Cap Stock Mutual Funds with Low Costs
199
Table 15.5
US Total Market & Multi-Cap Value & Growth Stock Funds with Low
Costs
199
15.5
US DOMESTIC STOCK MUTUAL FUNDS BY MARKET CAPITALIZATION
200
Table 15.6
S">
LOW COST ETFS: 208 FUNDS IN 27 TABLES
* 208 lowest cost ETFs available to US investors for purchase via
brokers
* Listed ETFs have the lowest management fees, no marketing charges,
and lower portfolio turnover, which is a proxy for lower portfolio
trading expenses.
* Chapter 16 discusses important ETF and mutual fund differences.
Since ETFs "trade like stocks," brokerage fees apply. ETFs are for
experienced traders, who know how to trade.
* These ETFs are grouped into 27 categories of the lowest cost
global, international, and US stock, bond, and real estate ETFs.
* Easily choose a low cost ETF portfolio that is fully diversified
by asset class and geography
Chapter
Contents of Chapters 16 and 17
Page
16
EXCHANGE-TRADED FUNDS VERSUS MUTUAL FUNDS
223
16.1
What are exchange-traded funds (ETFs) and exchange-traded products
(ETPs)?
224
16.2
ETFs are for experienced traders with open eyes
227
16.3
Are ETF management expenses really lower than mutual fund management
expenses?
229
16.4
Economic ETF trade size considerations
232
Table 16.1
Discount Broker ETF Trading Cost Amortization (% per year)
234
Table 16.2
Full Service Broker ETF Trading Cost Amortization (% per year)
235
17
LOW COST EXCHANGE-TRADED FUNDS (ETFs)
237
17.1
Characteristics of these low cost ETFs
237
17.2
GLOBAL AND INTERNATIONAL DIVERSIFIED STOCK ETFs
238
Table 17.1
Global - Whole World Stock ETFs with Low Costs
238
Table 17.2
International - Developed Countries Stock ETFs with Low Costs
238
Table 17.3
International - Regional Stock ETFs with Low Costs
239
Table 17.4
International - Emerging Markets Stock ETFs with Low Costs
240
Table 17.5
International - Value/Growth, Mid/Small-Cap Stock ETFs with Low
Costs
240
17.3
US DIVERSIFIED STOCK ETFs
241
Table 17.6
US Broad Market Stock ETFs with Low Costs
241
Table 17.7
US Large Capitalization Blend-Core Stock ETFs with Low Costs
241
Table 17.8
US Large Capitalization Value Stock ETFs with Low Costs
242
Table 17.9
US Large Capitalization Growth Stock ETFs with Low Costs
243
Table 17.10
US Extended Market Stock ETFs (non-large cap) with Low Costs
244
Table 17.11
US Middle Capitalization Blend/Core Stock ETFs with Low Costs
244
Table 17.12
US Middle Capitalization Value Stock ETFs with Low Costs
245
Table 17.13
US Middle Capitalization Growth Stock ETFs with Low Costs
245
Table 17.14
US Small Capitalization Blend-Core Stock ETFs with Low Costs
246
Table 17.15
US Small Capitalization Value Stock ETFs with Low Costs
246
Table 17.16
US Small Capitalization Growth Stock ETFs with Low Costs
247
17.4
GLOBAL AND INTERNATIONAL DIVERSIFIED BOND ETFs
247
Table 17.17
Global - International Diversified Bond ETFs with Low Costs
247
17.5
US DIVERSIFIED BOND ETFs
249
Table 17.18
US Broad Market / Multi-Sector Bond ETFs with Low Costs
249
Table 17.19
US Short-Term Bond ETFs with Low Costs
249
Table 17.20
US Intermediate-Term Bond ETFs with Low Costs
250
Table 17.21
US Long-Term Bond ETFs with Low Costs
251
Table 17.22
US Credit/Mortgage Bond ETFs with Low Costs
252
Table 17.23
US High Yield Bond ETFs with Low Costs
252
Table 17.24
US Inflation Protected / TIPS Bond ETFs with Low Costs
253
Table 17.25
US and State Municipal Bond ETFs with Low Costs
253
17.6
REAL ESTATE/REOC/REIT ETFs
254
Table 17.26
Global - International Real Estate ETFs with Low Costs
254
Table 17.27
US Real Estate/REOC/REIT Stock ETFs with Low Costs
255
DEPENDING UPON YOUR PORTFOLIO SIZE,
THIS INEXPENSIVE BOOK COULD SAVE YOU HUNDREDS,
EVEN THOUSANDS OF DOLLARS EACH AND EVERY YEAR
Total Yearly Savings From Investment Expense Reduction
Overall Annual Investment Expense Reduction as a % of Assets *
Size of Investment Portfolio
.5% of assets
1% of assets
1.5% of assets
2% of assets
$10,000
$50
$100
$150
$200
$25,000
$125
$250
$375
$500
$50,000
$250
$500
$750
$1,000
$100,000
$500
$1,000
$1,500
$2,000
$250,000
$1,250
$2,500
$3,750
$5,000
$500,000
$2,500
$5,000
$7,500
$10,000
$1,000,000
$5,000
$10,000
$15,000
$20,000
* Note: When compared to a very low cost index fund strategy, the
AVERAGE U.S. INVESTOR unnecessarily pays excessive investment costs of
between 2% and 2.5% of their total portfolio assets each and every
year. Totaling hundreds of billions of dollars transferred to the
financial industry annually, these unjustified costs consist of
excessive portfolio management fees, advisor fees, brokerage/trading
costs, sales loads, marketing fees, wrap fees, custody fees, etc.
Some might say: "Sure this is what I would save, but if I spend more,
I will earn higher returns."
Unfortunately, the research simply does not support paying more.
Higher investment costs just reduce net returns without increasing
performance. You simply cannot reliably buy higher investment returns.
Instead, you just transfer more of your hard-earned money to the
financial industry.
Here are some quotes from this book:
"Simply put, if you pay higher bond mutual fund fees, then these
HIGHER BOND MANAGEMENT EXPENSES TEND JUST TO BE A \"DEADWEIGHT\" LOSS
TO YOU. ... Combined, 109 of these 111 comparisons in these four
studies indicated that higher bond expenses meant lower returns to
investors." (page 181-182)
"(This) leads us to estimate the ANNUAL UNDER-PERFORMANCE OF THE
BROKER-SOLD FUNDS AT $4.6 BILLION DOLLARS... This under-performance is
BEFORE THE PAYMENT OF $9.8 BILLION IN 12B-1 FEES ... and the payment
of other distribution fees such as loads." (page 174, on Bergstresser,
et. al.)
"Furthermore, THE INFERIORITY OF ACTIVE STRATEGIES IS NOT JUST A US
PHENOMENON. Uniformly across the various countries that have SPIVA
reports available on line, when the time horizon increases active
strategies are increasingly inferior." (page 232, on Standard and
Poors' SPIVA research reports)
If You Really Believe You Can Get Better Investment Returns By Paying
Higher Costs
Rather Than Lower Costs, Then You Really Do Need To Buy And Read This
Book!
WITH THIS VALUABLE BOOK YOU CAN EASILY:
*
Find The Lowest Cost Mutual Funds And ETFs Available
*
Increase Your Net Investment Returns, While Reducing Your Risk
*
Put Your Investments On Autopilot And Get On With Your Real Life
Just Click This Button And Order Now!
Just $28
Then, Immediately Download This
250+ Page Acrobat Format Book
Thank You Very Much For Your Order!
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* The general investment principles discussed in this book apply
worldwide. The lists of low cost mutual funds and ETFs were developed
using screening criteria and processes discussed in this book. These
lists are for investors in various countries who have some form of
access to mutual fund companies domiciled in the US and to ETFs that
are traded on US exchanges.
* All of the personal finance, personal financial planning, personal
investment management, and other information in this book is solely
for your informational and educational purposes related to your
personal, private, and non-commercial use. This book DOES NOT
constitute or provide personalized financial planning advice,
personalized investment advice, or any other kind of personalized
financial advice under the laws and regulations of the United States
of America and its various States or of any other country in the
world. In no way does this book constitute a solicitation or offer to
sell investment securities, investment advisory services, financial
planning services, or any other kind of financial service as defined
under any financial or securities law anywhere in the world. If you
need financial or investment advice, hire a personal adviser.
* If you have questions, please use our
ABOUT THE AUTHOR
Written With In-depth And Objective Knowledge Of
What Really Works In Personal Finance And Investing
LARRY RUSSELL
MBA (STANFORD UNIVERSITY), MA (BRANDEIS UNIVERSITY), AND BS (M.I.T.)
\"MY GOAL IS TO INCREASE YOUR KNOWLEDGE AND IMPROVE YOUR ABILITY TO
MANAGE YOUR OWN FINANCIAL AFFAIRS.\"
* I am an experienced financial planner, the author of extensive
personal finance publications on the web, and the developer of
sophisticated lifetime financial planning software. Approaching a
creaky 60 years of age, I have gained broad expertise in economics,
finance, investments, accounting, taxation, probability, statistics,
software development, and web technologies.
* For 25 years, I was a product manager, business development
manager, financial manager, and corporate development executive with
major corporations (HP and Sun Microsystems) and with technology
startups. I retired from the computer industry in 2001 and established
Lawrence Russell and Company. For my own interest, I began an in-depth
and systematic reading of the research literature affecting personal
finance and investing.
* For 10 years, I have read the financial media and publications of
the financial services industry, but I find most of this material to
be superficial and/or self-interested. Instead, I prefer to read
finance and investment journals, to visit finance professors’
websites, and to search the Internet for financial research
publications and working papers. Over the past decade, I have
collected and read many thousands of research paper abstracts, while
reading the full text of over 2,000 seminal finance papers in their
excruciating economic and statistical details.
* Many of these finance research papers hold information that is
directly relevant to individuals who want to improve their financial
planning and investing. However, research papers are not written for
individuals. Instead, they are targeted for an audience of academics
and highly trained financial industry research professionals.
* To make some of this information more accessible to individuals,
in 2003, I began to publish financial research summaries on my largest
investment education website, . Since 2003, I have published over
1,000 articles on a half-dozen of my personal finance and investment
websites. Some of this book has been drawn from these web articles,
and the links provided in the book will enable you to explore my
personal finance and investing websites.
* By 2003, my understanding of valid and comprehensive methods for
individuals to optimize their personal finance and investment planning
had coalesced. I began to develop an automated and highly customizable
lifetime financial planning application. This software tool, , was
designed initially to serve as a decision support toolset for advisory
clients.
* In 2006 I decided to develop a standalone configuration of that
do-it-yourself individuals could operate themselves. is now the most
sophisticated do-it-yourself lifetime financial planning software
available on the market for under $100.
* Also, my firm, Lawrence Russell and Company, is a Registered
Investment Adviser in the wonderful state of California (Certificate
#133101). I set up a purely fee-only advisory practice and only charge
hourly fees or fixed project fees for customized planning services. I
do not charge any percent of asset fees, and I do not sell any
investment or insurance products of any kind. I simply will not accept
financial industry compensation of any kind. Any compensation paid by
the industry is potentially morally corrosive, and I refuse to get on
that slippery slope.
WITH THIS VALUABLE BOOK YOU CAN EASILY:
*
Find The Lowest Cost Mutual Funds And ETFs Available
*
Increase Your Net Investment Returns, While Reducing Your Risk
*
Put Your Investments On Autopilot And Get On With Your Real Life
Just Click This Button And Order Now!
Just $28
Then, Immediately Download This
250+ Page Acrobat Format Book
Thank You Very Much For Your Order!
*
*
*
Copyright (c) 2011 Lawrence Russell and Company. All rights reserved.
Larry Russell, Managing Director
MBA (Stanford U.), MA (Brandeis U.), and BS (M.I.T.)
\"MY GOAL IS TO INCREASE YOUR KNOWLEDGE AND IMPROVE YOUR ABILITY TO
MANAGE YOUR OWN PERSONAL FINANCE AND INVESTING AFFAIRS.\"
LAWRENCE RUSSELL AND COMPANY
1077 Prospect Boulevard
Pasadena, California 91103
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