Originally Posted by
SwampFoxx
Maybe I’m missing something, but I’ve only been charged $2.30 worth of fees from Schwab in 6 months. Are these fees linked to the size of the account? Can I expect the fees to get bigger as the account grows?
Also, flap you’re gonna have to dumb it down for me please. Define basis points and 40/100 of 1%? And if ya don’t have anything better to do, explain active and passive management. I know what it is, but I want to make sure you know what it is.
A basis point is dividing 1% by 100.
If you have a million dollars and are charged 1% you pay $10,000.
1 basis point = $100
Total Stock Market index fund in the PRAP core costs only 1.45 basis points in fees, or $145 on a million dollar account.
That is an index fund that owns a basket of 3400+ stocks. By buying this you are buying the market, and not trying to beat the market. That’s passive investing. Buy the market (index funds)getting it as cheaply as possible.
PRAP also has International Index and Bond Index. You can build a 3 fund portfolio very very cheap in the PRAP core funds.
Active investing is where managers believe they can beat the market returns. They believe they have such a great process for picking stocks, that over time they will produce excess returns over those that buy index funds.
These actively managed funds charge much higher fees so they will need to have enough excess returns that they pay for their fees and make the whole excercise worthwhile
Difficult if not impossible to do over a long period of time.
PRAP International fund active vs PRAP International Index fund which is passive
This is why passive is so popular. So cheap it’s almost free and happy to get the return of the market.