Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

Watch the expense ratios: Not all index mutual funds are cheap

Wall Street Physician, MD
Finance
December 18, 2017
18 Shares
Share
Tweet
Share

Many of us take for granted that we should be paying next to nothing for our index funds.

Vanguard, Fidelity, and Schwab offer great index funds with very low expense ratios.

But there are many other providers of index funds. And unfortunately, they do not charge the low expense ratios we have come to expect from Vanguard, Fidelity, and Schwab.

Interactive Brokers and no transaction fee index funds

Interactive Brokers is well-known as a trading brokerage firm. They have very low commissions on stocks (0.5 cents a share, with a $1 minimum), and if you ever plan to buy stocks on margin, they offer some of the lowest interest rates in the industry.

To buy mutual funds at Interactive Brokers, however, you have to pay a $14.95 transaction fee, or 3% of the purchase amount. They do have a list of over 4,300 funds with no transaction fee.

Unfortunately, most of them are actively-managed mutual funds — definitely not something you want as an index fund investor. But there are 109 index funds that have no transaction fee. Unfortunately, none of Vanguard’s, Fidelity’s, or Schwab’s index funds made the list.

Using the list of mutual funds from Interactive Brokers and searching them on Morningstar, Let’s take a look at the “other” guys in the index fund world.

S&P 500 index funds

Among S&P 500 index funds, none of the index funds listed had the types of low expense ratios we come to expect from Vanguard, Fidelity, and Schwab:

Fund Family Ticker Assets ($bn) Expense Ratio
Blackrock BSPAX 12 0.36%
Deutsche Bank SXPAX 0.99 0.60%
Invesco SPIAX 1.1 0.59%
Mainstay MSXAX 1.3 0.53%
Principal PLSAX 5.6 0.48%
Victory MUXAX 0.24 0.58%

 

Fund Family Ticker Assets ($bn) Expense Ratio
Vanguard VFIAX 367.5 0.04%
Fidelity FSTVX 46.4 0.04%
Schwab SWPPX 30 0.03%

International index funds

What about international index funds? We can quibble about a basis point here or there, but these expense ratios are nowhere close to that of Vanguard, Fidelity, or Schwab:

Fund Family Ticker Assets ($bn) Expense Ratio
Blackrock BDOAX 0.6 0.41%
Blackrock MDIIX 10.3 0.37%
Dreyfus DIISX 0.61 0.60%
Principal PIIPX 1.1 0.72%
TIAA-CREF TRIPX 11.6 0.21%

 

Fund Family Ticker Assets ($bn) Expense Ratio
Vanguard VTIAX 315.6 0.11%
Fidelity FSIVX 20.8 0.06%
Schwab SWISX 4.1 0.06%

Bond funds

Again, there was not a single no-transaction-fee fund listed that had an expense ratio comparable to Vanguard, Fidelity, or Schwab.

Fund Family Ticker Assets ($bn) Expense Ratio
Blackrock BMOAX 0.99 0.35%
Deutsche BONDX 0.08 0.41%
Dreyfus DBMIX 1.4 0.40%
Mainstay MIXAX 0.14 0.75%
Principal PBIPX 1.9 0.63%
TIAA-CREF TBIPX 8.8 0.27%

 

Fund Family Ticker Assets ($bn) Expense Ratio
Vanguard VTIAX 315.6 0.11%
Fidelity FSIVX 20.8 0.06%
Schwab SWISX 4.1 0.06%

Assets under management versus expense ratio

For all of these other index funds with high expense ratios, I made a scatter plot of assets under management and expense ratio:

Investors are voting with their money. Index funds with lower expense ratios tend to attract more assets.

It turns out that as your expense ratio goes down, your assets under management goes up. Who knew that investors would put their money with the companies with the lowest fees?

Why don’t these index funds charge less?

I suspect that some of these firms have exclusive contracts with 401(k) or other retirement account providers, essentially locking in some investors into these relatively high-cost index funds.

They may also have captured index fund money many years ago, and have chosen not to lower their rates with Vanguard, Fidelity, and Schwab, leaving their investors to pay expense ratios that were competitive 5 to 10 years ago. Some of these investors have never bothered to switch to a lower-cost index fund, or it may be too costly from a tax perspective to switch.

Conclusion

There are many index funds out there, but some are cheaper than others. Index funds are a commodity, and you should look for the one with the lowest expense ratio.

Vanguard, Fidelity, Schwab, are doing an exceptional job by offering their index funds at such low expense ratios. By offering index funds at competitive rates, they have cornered the index fund market, leaving their competitors in the dust.

When you look for index funds in your 401(k) or brokerage, look very carefully at the expense ratio before immediately jumping into any fund that is called “index.”

“Wall Street Physician,” a former Wall Street derivatives trader , is a physician who blogs at his self-titled site, the Wall Street Physician.

Image credit: Shutterstock.com

Prev

The Good Doctor shows us the value of time

December 17, 2017 Kevin 1
…
Next

The CVS merger with Aetna: What does it mean?

December 18, 2017 Kevin 18
…

Tagged as: Practice Management

Post navigation

< Previous Post
The Good Doctor shows us the value of time
Next Post >
The CVS merger with Aetna: What does it mean?

More by Wall Street Physician, MD

  • 4 reasons why physicians should hire a financial advisor

    Wall Street Physician, MD
  • Investing in the stock market is like playing that game of rock-paper-scissors

    Wall Street Physician, MD
  • 7 sources of financial anxiety for physicians

    Wall Street Physician, MD

Related Posts

  • What it is like to watch someone die

    Casey Krickus
  • Should there be mandatory state enforced nurse-to-patient ratios?

    Suneel Dhand, MD
  • The CVS-Aetna merger is still the one to watch in 2018

    Leah Binder

More in Finance

  • Doctors and disability insurance: Protecting your income

    Amarish Dave, DO
  • 1 in 5 doctors will become disabled. Are you prepared?

    Amarish Dave, DO
  • The pros and cons of whole life insurance for high-income earners

    Shane Tenny, CFP
  • Applying the differential diagnosis method to investing

    Amarish Dave, DO
  • Unlocking your full earning potential: a physician’s journey to a $70,000 salary boost

    Contract Diagnostics
  • For newer doctors, avoid lifestyle inflation

    Amarish Dave, DO
  • Most Popular

  • Past Week

    • The erosion of patient care

      Laura de la Torre, MD | Physician
    • Challenging the diagnosis: dehydration or bias?

      Sydney Lou Bonnick, MD | Physician
    • COVID-19 unleashed an ongoing crisis of delirium in hospitals

      Christina Reppas-Rindlisbacher, MD, Nathan Stall, MD, and Paula Rochon, MD | Conditions
    • Air quality alert: Reducing our carbon footprint in health care

      Shreya Aggarwal, MD | Conditions
    • A teenager’s perspective: the pressing need for mental health days in schools

      Ruhi Saldanha | Conditions
    • End-of-life ethics and antibiotic use [PODCAST]

      The Podcast by KevinMD | Podcast
  • Past 6 Months

    • Medical gaslighting: a growing challenge in today’s medical landscape

      Tami Burdick | Conditions
    • I want to be a doctor who can provide care for women: What states must I rule out for my medical education?

      Nandini Erodula | Education
    • Balancing opioid medication in chronic pain

      L. Joseph Parker, MD | Conditions
    • The erosion of patient care

      Laura de la Torre, MD | Physician
    • I’m a doctor, and I almost died during childbirth

      Bayo Curry-Winchell, MD | Physician
    • Mourning the silent epidemic: the physician suicide crisis and suggestions for change

      Amna Shabbir, MD | Physician
  • Recent Posts

    • End-of-life ethics and antibiotic use [PODCAST]

      The Podcast by KevinMD | Podcast
    • Physician return-to-work policies

      Deepak Gupta, MD | Physician
    • Communication, power dynamics, and organizational culture in health care

      Beth Boynton, RN, MS, CP | Conditions
    • How my patients’ Zoom backgrounds made me a better doctor

      Joseph Barrera, MD | Physician
    • Understanding reproductive rights: complex considerations

      Anonymous | Physician
    • Innovations in surgical education [PODCAST]

      The Podcast by KevinMD | Podcast

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

Leave a Comment

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

CME Spotlights

From MedPage Today

Latest News

  • Mortality Risk From Damaged Bronchi Extends to People Without COPD
  • ChatGPT Improving, but Still Lacks Reliability as a Clinical Support Tool
  • COVID Vax in Pregnancy Protects Young Infants Against Omicron
  • Repeat Tests for Inflammation Aid Prognosis After Acute Heart Failure
  • FDA OKs Another Injectable for Rare Kidney Disorder

Meeting Coverage

  • Hot Flashes: Precursor to Alzheimer's Disease?
  • SABR Offers New Hope for Older Patients With Inoperable Kidney Cancer
  • Menopausal Women With Obesity Endure Worse Symptoms, Less HT Relief
  • Study Pinpoints Growing Use of Cannabis to Manage Menopause Symptoms
  • Fezolinetant Benefits Women Not Suited for Hormone Therapy
  • Most Popular

  • Past Week

    • The erosion of patient care

      Laura de la Torre, MD | Physician
    • Challenging the diagnosis: dehydration or bias?

      Sydney Lou Bonnick, MD | Physician
    • COVID-19 unleashed an ongoing crisis of delirium in hospitals

      Christina Reppas-Rindlisbacher, MD, Nathan Stall, MD, and Paula Rochon, MD | Conditions
    • Air quality alert: Reducing our carbon footprint in health care

      Shreya Aggarwal, MD | Conditions
    • A teenager’s perspective: the pressing need for mental health days in schools

      Ruhi Saldanha | Conditions
    • End-of-life ethics and antibiotic use [PODCAST]

      The Podcast by KevinMD | Podcast
  • Past 6 Months

    • Medical gaslighting: a growing challenge in today’s medical landscape

      Tami Burdick | Conditions
    • I want to be a doctor who can provide care for women: What states must I rule out for my medical education?

      Nandini Erodula | Education
    • Balancing opioid medication in chronic pain

      L. Joseph Parker, MD | Conditions
    • The erosion of patient care

      Laura de la Torre, MD | Physician
    • I’m a doctor, and I almost died during childbirth

      Bayo Curry-Winchell, MD | Physician
    • Mourning the silent epidemic: the physician suicide crisis and suggestions for change

      Amna Shabbir, MD | Physician
  • Recent Posts

    • End-of-life ethics and antibiotic use [PODCAST]

      The Podcast by KevinMD | Podcast
    • Physician return-to-work policies

      Deepak Gupta, MD | Physician
    • Communication, power dynamics, and organizational culture in health care

      Beth Boynton, RN, MS, CP | Conditions
    • How my patients’ Zoom backgrounds made me a better doctor

      Joseph Barrera, MD | Physician
    • Understanding reproductive rights: complex considerations

      Anonymous | Physician
    • Innovations in surgical education [PODCAST]

      The Podcast by KevinMD | Podcast

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

Leave a Comment

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...