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Why ShareBuilder 401k offers only low-expense index funds


The ShareBuilder fund line-up is built on the investment philosophy that managing the factors that can be controlled is the most effective way to help investors succeed. Fund costs, or expenses, are a key factor. In fact, a recent study by Morningstar found that "in every single time period and data point tested, low-cost funds beat high-cost funds!"

Yes, the impact of high fund expenses can take a big bite out of how much you have come retirement. Index fund typically have noticeably lower expense ratios than actively managed funds. Just consider that ShareBuilder's model portfolios have an average expense ratio of 0.21% — that's nice and low! Add in all the fund fees that participants pay in retirement plans which can cover everything from advisory fees to recordkeeping to distribution, and few can compare to ShareBuilder 401k.

This chart may be handy as you consider how participant fees tend to vary by the amount of money (assets) and participants in a plan – the key being how much money:

  Plan Assets # of Participants Industry Average Participant Fees* ShareBuilder 401k ShareBuilder Advantage
  $250,000 25 2.76% 0.98% 65% less
  $2,500,000 50 1.48% 0.78% 47% less
  $10,000,000 200 1.25% 0.68% 46% less

To learn more about the advantages of index-based investing, just read this guide.

*Cerulli Associates Quantitative Update, Retirement Plans 2009. The participant fees analysis assumes a 75% equity and 25% fixed income. The fees do not include administration, custom compliance, systems work, etc., that the employer may pay. ShareBuilder 401k participant prices reflect the expense ratio of our moderate model portfolio that most closely mirrors the Cerulli analysis equity to fixed income ratio and all applicable management fees.

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