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When investing for retirement, costs matter. All else being equal, investments with consistently low management fees can give you a head start in achieving competitive returns and building a larger retirement nest egg in the long run. Exchange Traded Funds (ETFs), a passively managed type of Index Fund, offer low expense ratios, along with built-in diversification within market segments. Large or excessive fees within actively managed mutual funds can diminish returns and make it more difficult for the fund manager to add value.
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| Annual operating expenses for ETF index funds versus mutual funds* |
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| Over time, ShareBuilder 401(k) participants can accumulate more for their retirement by investing in cost-efficient ETF index funds instead of comparable traditional mutual funds. For example, assume that a 35 year old individual invests $250 a month until retirement at age 65 into a Growth Model Portfolio and the investment has a fixed annual rate of return of 10.0% compounded monthly. After 30 years of investing in an ETF with an expense ratio of 0.20% versus a mutual fund with an expense ratio of 1.40%, the individual will have increased their retirement fund by $101,805 by paying less management fees. What's even more remarkable is that this amount exceeds the cumulative contribution of $90,000 made during this 30 year period.**
To learn more about the differences between ETF index funds and mutual funds,
see our comparison table. |
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The following ETF index funds are being compared against the Industry Average for mutual funds and are available in the ShareBuilder 401(k) Plan:
IWM - iShares Russell 2000 Index
SPY - S&P 500 Index SPDR
EFA - iShares MSCI EAFE Index Fund
DVY - iShares Dow Jones Select Dividend Index
AGG - iShares Lehman Aggregate Bond
Visit our Investment Center to view all model portfolios and ETF Index Funds available in the ShareBuilder 401(k) and to access a prospectus for individual ETFs.
* ShareBuilder Balanced Model Portfolio versus the Industry Average for a mutual fund with a balanced objective.
Source for Mutual Fund Industry Averages: Lipper front-end load funds.
** This hypothetical example utilizes a calculation based on a compounded fixed rate of return. It is not a guarantee of future return or market performance. Investment experience will vary with ETF selection and related management fees as well as changing market conditions. |
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