The I Fund is a special bargain

[azanon]

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I'm sure many of you guys are aware, we all pay very low, index fund, like rates for all of the TSP funds. I want to say those rates are something like 0.2% management fee (or less).

For the F,C,S,and G fund, that's not particularily special since you can find other no-load fund companies that offer index funds with similar fees. However, to my knowledge (and please correct me if i'm wrong), i'm not aware of any 0.2% management fee fund that's a stock international fund or EAFE index fund with that low a fee. Most international funds management fees are a minimum 1%, and most are 1.5-2% or higher.

If someone knows of an outside, no-load purchasable International Fund with a management fee in the neighborhood of 0.2% or less, please list it.

Azanon

 

[thinks]

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Very interesting... I've not thought about that angle.

 

[Mr. Duke]

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Co-workers and I have also been down this street questioning management fees for number of trades versus equally split across all TSP participants....It does appear to be split equally, and the management fees have been difficult if not impossible todistinguish out of the account balances.... I concur management fees are definetely low....better not discuss this much more they will raise their fees!

Congrats on a positive day!

 

[azanon]

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The management fees are actually published somewhere, I believe at the TSP website- I looked it up once a few months back, and their all in the neighborhood of 0.2%. As i said above, for all the funds except the I, we're not getting any special deal since the G, F, S, and C fund operate like "index" funds, meaning there is no active fund manager attempting to "beat" the market. Thesecurities that compose those funds are done with little forethought, and are simply designed to mimic the indexes.

In the case of the I fund though, I'm just not aware of any low cost index international stock mutual funds out there. That's why I think that one's particularily special, and a good deal.

 

[rokid]

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Vanguard's Total International Stock Index (VGTSX) tracks the EAFE and has an expense ratio of .36%. Not as low as the TSP I Fund, but not bad.

 

[Pete1]

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.10 for all of the funds according to the TSP website :^

 

[Pete1]

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Also note that Vanguard is considered miserly and its index funds set the benchmark for low cost, index fund investing. At .10, all of the TSP funds are a remarkable deal, evenbetter thanVanguard. If only we could get a value fund or an international small fund. International small seemsless likely sinceinternational small index funds are nonexistent outside of DFA funds. Maybe Barclays will follow DFA's lead someday and offer an international small index fund.

 

[Pete1]

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As a group, TSP talk membersmay want to petition TSP for a value fund since this asset class is widely indexed and offered by many 401K plans.

 

[azanon]

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Hmm, i'm seeing VGTSX at 0.24% at msn.com, course Vanguard would be more up to date i'm sure. Well, i guess i wasnt aware of that one. Oh well - we still get a bargain with our TSP.

 

[tsptalk]

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Pete1 wrote:

As a group, TSP talk membersmay want to petition TSP for a value fund since this asset class is widely indexed and offered by many 401K plans.

A separate growth fund would be nice also.

 

[rokid]

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Actually, my error. VGTSX tracks the EAFE plus Emerging Markets. VDMIX tracks the EAFE. VGTSX has an expense ratio of .36% and VDMIX's expense ratio is .34% as of 10/31/2003.

 

[azanon]

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Value funds have had their shining moments the past few years. Forced to guess, I'd guess the darling funds of the near future will be growth funds, esp large/mid cap ones, over the next year or two.

If we can just get Iraq somewhat stabilized, and the presidency taken care of, folks will relax and the econony should recover

 

[Pete1]

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At age 42, my time horizon is about 40-50 years (hopefully ).Historical long-term results haveresulted in a premium for value but of course, past performance does not guarantee future results.Only time will tell. I like the idea of tilting the portfolio towards struggling, undervalued companies as opposed to "stars"and at least at this point, historical, long-term returnshave favored value as well.

 

[azanon]

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ahh, well now you're arguing from a buy-and-hold standpoint. I'll admit I mostly speak under the assumption that most folks here are not buying-and-holding. My recommendation was only for this coming year, or maybe 2.

You may be right about value being the superior strategy (now) considering the nasdaq was ~ 75% off its peak of 4700 in Jan 03, but i think from 1999 prior, growth strategies actually was historically superior or, if not, very very close. The only superiortypes of stocks i'maware of either 99' or today, is small caps are about a good 2% better than large caps, i believe, historically.

Growth stocks destoyed value in the 90s.

 

[Pete1]

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The problem with the returns achieved by growth stocks in the 90s is the potential for mean reversion and lower returns in future periods. I think we saw some of that in the recent bear market with value keepingdiversified portfolios out of trouble. That is why I wish that we hadvalue andinternational small - further diversification.

The biggest hole is international small and perhaps emerging markets but I think international value, large value, and small value wouldbe nice as well. DFAs model portfolios include the following asset classes: large, large value, small, small value, eafe, internationalvalue,international small, international small value,and 3 emerging markets funds (ooops almost forgot REITS). Unfortunately, TSP is giving us the dreaded hybrid L fund rather than further diversification. Value certainly would havebeen a nice option during the recent bear market.

 

[azanon]

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I think we saw some of that in the recent bear market with value keepingdiversified portfolios out of trouble. That is why I wish that we hadvalue andinternational small - further diversification.

My understanding is that the C fund and S fund are large cap "blend" and mid/small cap "blend" funds respectively (because the S&P500 is large blend, and the Wilshire 4500 is mid/small blend) so "we" are every bit as much value oriented as we are growth. My understanding ofthe definition of a"blend" fund is one which has either 1. A mixture of growth and value stocks and/or 2. a fund holdingstocks having both growth and value elements. Point - i doubt a portfolio of 50/50 growth and value funds would have performed much different than the C and S fund did.

I think you'll find that "true" growth funds took a much worse beating in 2000-2002 than the C and S fund did, and likewise, "true" value funds obviously did a lot better. So we just "lost" less via inherent diversified funds. The only portfolio that would have made money during that period was probably a true value stock holding and/or one also having bonds/government securities.

 

[Pete1]

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I do not disagree with anything in your last post. Blend funds take aneutral position holding roughly equal positionsacross value, blend, and growth. Modern Portfolio Theory asserts that there is a value premiumand a small premium. Large valuehas provideda more consistent premium as opposed to small and small value. The Efficient Market Theory and "the random walk" would say thatthis should not continue to happen and yet,thepremiums of value over growth and small over largecontinue to persist (perhaps overstated earnings reports by large growth companies explain part of it). As you suggest, our blend funds should wind up someplace in between and historically, the return of the S&P falls directly between value and growth with value at a premium.

 

[Pete1]

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Just want to add thatmany including John Bogle, do not feel that the portfolio should be tilted in any way but rather the portfolio should approximate the market capitalization of the entire U.S. stock market ala Vanguard's Total Stock Market index.Ironically,theTSM indexis very heavily tilted towards large blend (about 75% of the index is in U.S. large).