Chris Hill: Hey, thanks for watching! We’re
coming to you from Fool global headquarters in Alexandria, Virginia. I’m Chris Hill here
with Bill Mann and Sean Gates. Thanks for being here, guys. One disclaimer — yes, it’s our
first time with a disclaimer. But Sean Gates, a certified financial planner, is from
The Motley Fool’s separate sister company; didn’t know we had sister companies, did you?
We do. Motley Fool Wealth Management. Please note that, Motley Fool Wealth Management’s
advisory services are only provided to their clients, the views expressed today are Sean’s
and do not necessarily reflect those of Motley Fool Wealth Management or its affiliates.
These comments, including comments on securities, may not be relied upon as
recommendations or investment advice. It’s a little tip for you at home, kids, when
the lawyers tell you to read the disclaimer, you read the disclaimer.
Alright, let’s talk about investing, which is something that we love to do, but a lot
of people, so many people out there still are not investing, even with the rise of the
bull market that we’ve seen. So, we’re going to talk today about an easy way to do investing
and that’s through mutual funds. And let’s just start, Sean, with the most basic of definitions
— we don’t want to assume everybody knows what a mutual fund is —
what is a mutual fund? Sean Gates: Yeah. So, a mutual fund is simply
just a pooled investment vehicle, you can think of it sort of like a wrapper around
the underlying investment components. Typically, you’ll pay a fee for the individual stock
selection that’s inside of the mutual fund or whatever component parts are in there.
You want to keep in mind that there are active and passive versions of mutual funds. Typically,
you will need to be aware of the fact that you don’t own the underlying shares of the
mutual fund, you own an interest — there’s a pooled interest — in the mutual fund and
so you can be liable for capital gains that other people might have
experienced or things of that nature. Bill Mann: Yeah. So, a really simple way to
put it is, with one ticker, you get access to a number of different, dozens, even hundreds
of different appropriate securities to that strategy. Gates: Yeah. Hill: Let’s talk about the active versus passive,
because I think, in general, at The Motley Fool, we are fans, for a number of reasons,
of passive investment vehicles. The most famous, probably the one that’s name checked
the most, the S&P 500 Index Fund. Mann: It’s a pretty good fund. And it has
actually beaten about 80% of all of the active funds that are supposed to try and beat it
every year. So, you know, it’s been said a bunch of different times, Burt Malkiel has
said it, Warren Buffett has said it, if you don’t think you know what you’re doing, really
the best way to get broad exposure is by getting the S&P 500 Index Fund, which is
500 of the largest U.S. companies. Hill: Well, and what’s great about index funds is,
there are a lot of different indices out there. I mean, we talk about the S&P 500,
it’s a great fund, I’ve got an S&P 500 Index Fund. But, Sean, there are a lot of other
indices out there. You can go small-cap; you can go international if you want.
Gates: Totally. Yeah, I mean, there’s the S&P 400, there’s the EAFE Index, you can actually
create your own index if you wanted to. So, there’s a whole number —
Mann: … I don’t recommend doing it at home right away. [laughs]
Gates: [laughs] No. Hill: [laughs] Speaking of international.
Bill, is that a good way for people, who are starting out investing, to maybe dip their
toe in investing overseas? Because here in the United States, one of the things we benefit
from is we’ve got a strong regulatory body that the public companies have to follow.
That’s not the case in every country out there. So, it would seem like, I’m interested in
investing in Europe or Brazil, and maybe a mutual fund or an ETF is the way to do it.
Mann: Yeah. Think about it this way. The U.S. is 5% of the world’s population but 54% for
the world’s market cap, when you add up all the stocks here versus overseas. When you
are thinking about investing overseas, there really are a couple of impediments to being
able to invest in many individual companies and getting exposure overseas. So, mutual
funds may actually be the easiest, cheapest way to do it.
Hill: In terms of investing in a fund, Sean, before we get into picking funds — and I
know you guys have a couple of suggestions for anyone who’s maybe shopping for a mutual
fund — what are sort of the nuts and bolts in terms of setting up an
account and funding it? Gates: Sure. So, very similar to if you wanted
to buy stocks, you would want to set up a brokerage account, it could be a retirement
account, it can be a taxable account, but you would go to somewhere, like, Fidelity,
Schwab, etc., and just say, “I would like to open a brokerage account.” And then,
from within the brokerage account, you want to add funds to it and then you would be able
to electronically place transactions. And one of the things that you can invest
in would be a mutual fund and their ticker. Mann: Yeah. You can also buy the mutual funds
directly from the fund company itself. You can open up an account with Vanguard,
for example. And they have hundreds of funds that you can buy, including their S&P 500 Fund,
which is very cheap. When you go through a broker, it allows you to keep everything together
in one place, as far as you’re concerned, it is a slightly more
expensive way to do it. Hill: Well, and speaking of expensive, I think
one of the things that may keep people away from mutual funds is the cost right out of
the gate, because a lot of times, unlike stocks that have a price that moves every day, you want
to invest in a mutual fund, a lot of times — it’s almost like poker — there’s a minimum
buy-in, you have to put up $2,000, $3,000 out of the gate. I know that was the
case when I was starting out. Is that still the case today?
Gates: I would say, by and large, yes, there is still a minimum amount that you need to invest.
Some of them have come down and depending on the scale of the mutual fund.
Mann: Some are as low as $500, but it tends to be — I mean, if you think about it from
the mutual fund’s perspective — which is not a perspective that we tend to think about
— you are setting up an account and they do have some expenses that they are bearing
on your behalf. So, there are minimums for a reason. Hill: Is that why ETFs are popular to the extent that they are popular, because essentially
you get to buy them in smaller chunks? Mann: Yeah, that’s definitely one reason.
Gates: Although, I would say — so, ETFs are typically intraday liquid like stocks, whereas
mutual funds are typically daily liquid. So, you would only be able to liquidate
the position at the end of the day. Hill: When it comes to stocks, individual
businesses, there are different metrics that we like to look at as investors. Let’s get
to some of the metrics for funds themselves. Bill, expense ratio, what am I calculating
and what am I looking for here? Mann: So, there are a number of ways that
you end up having to pay a mutual fund company for the right to have them manage your money.
The basic one is the expense ratio, which is an amount that they subtract from your
fund annually. So, it is a cost that you don’t just pay it when you show up, you pay it every
single year that you are a customer of the fund company. And we generally like to say
that the lower the expense ratio, the better. Hill: Sean, when it comes to turnover — which
is another thing we like to look at with mutual funds — is it safe to say — similar to what
Bill just said — the lower the turnover, the better? Gates: I would say, by and large, yes, particularly for stock-focused mutual funds because
that’s where the capital gains issue can arise. But if it’s something like a bond portfolio or
at least has exposure to other underlying investments, turnover could be okay,
but typically lower, better. Mann: Yeah. So, what Sean is saying, for capital
gains, even if you don’t trade in and out of the fund. So, with the stock, if you hold
it for 15 years, you’re never paying tax on the gains of the stock. But with mutual funds,
tax law has it so that you have to pay based on the transaction that the fund manager
makes each year, those are taxable to you. So, it is something that you need to be careful of
when you’re looking at funds. The higher the turnover, potentially the higher the tax bill
that you’re going to have to pay each year. Hill: Let’s get to fees, because that’s been
mentioned a couple of times here. I mean, I’m reminded of the guy who goes in to buy
a car and the guy at the car dealership says, “What would you like to pay for this car?”
“I would like to pay nothing.” [laughs] Mann: That’s right.
Thank you for asking! Hill: So, when it comes to the mutual fund fees,
obviously, we want to pay as low as possible, but what’s reasonable when it comes
to active funds, and what is a reasonable fee for a passive fund?
Mann: Passive funds. Okay. So, it makes a little bit of a difference to what you’re
talking about, if you’re talking about ones that are linked to the S&P 500, you can find
ones that are charging seven basis points, which means for every — let me see if I can
get the math right — for every $1,000 you’re paying $0.70 a year?
Hill: Okay. That’s right. Mann: Is that about right?
Hill: Yeah. Mann: Yeah, so not very much. With more esoteric
funds or when you start going international or things like that, you’re going to see higher
expense ratios. And I don’t necessarily agree with the orthodoxy that The Motley Fool has
about expenses, in that, if you have a fund that has shown a really excellent long-term
return, you should be willing to pay up. Gates: And I would say, a broad range that
I tend to pay attention to when I’m helping clients, would be on the order of 75 basis
points. So, if 1% is 100 basis points, 75 basis points.
Mann: Yeah. As a blend, right? Gates: As a blend. Yeah.
Hill: In terms of fund’s performance, we’ve all heard the line, ‘past performance is no
guarantee of future success,’ isn’t it though? Particularly when it comes to active funds.
If we’re talking about human beings who have a track record of five, ten years. I guess
my question is, if I’m looking at mutual funds, to what extent should I be looking at past
performance? Because I know that from a marketing standpoint, the marketing people are probably
going to say, “Well, over the last five years, it’s done this.” How much weight should I,
as an investor, give past performance? Gates: I would say, you want to give it a
serious amount of weight, but you have to be careful because the disclaimer that we
always have is — past performance is not indicative of future performance. And so,
you could have a rock star manager who has been managing a fund for ten years and then
when you put your dollars in his hands, the next year he does terribly. So, the track
record is not indicative of what you can expect. But I do think that track record is an indicator
of the procedure that the portfolio management team takes, their methodology.
And that is important. Mann: Especially as you go longer term, going
backwards, and the longer you have going forward. If you are investing in, really, in anything,
but we are talking about mutual funds, if you’re looking at something that’s returned
15% per year over the last ten years, that’s a great result. And I would bite someone’s
hands off for those types of results. But that doesn’t mean that this next year, you’re
going to make 15%. And if you’ve got 365 days, you really, really have to be realistic about
what kind of returns you’re going to get. Hill: Alright. We’re going to get to your
questions in just a moment; some good questions coming in. We’re going to get to the mutual
funds that these guys have in terms of a watchlist, to the extent that you’re building
a watchlist for mutual funds. But first, I want to give a quick mention;
I know we’re talking about mutual funds, but typically we’re talking about stocks,
and if you’re looking for some more stock ideas, Tom Gardner, CEO here at The Motley Fool,
has put together his top stocks for 2020. It’s in a report available to members of
Motley Fool Stock Advisor, which is our flagship service. So, if you’re already a member of
Stock Advisor, just go to fool.com/2020, you can check out the report. If you’re not a
member of Stock Advisor, you can still go to fool.com/2020 and you can get details on
how to become a member. You’ll get access to the report from Tom Gardner,
his top stocks for 2020. Sean Gates, let me start with you. For people,
who are looking for ideas when it comes to mutual funds, what do you got?
Gates: So, I try to go dead simple. So, my mutual fund is the ticker,FBALX
[Fidelity Balanced Fund]. It’s a low-cost fund. So, we were talking about
fees just a little while ago. Mann: You know that says balx, right?
Gates: [laughs] Yeah. Mann: Isn’t that great?
Gates: That’s why I picked it. The only reason why I picked it. So, we were talking about fees. And the fees
on it are quite low. The expense ratio is approximately 0.5, 0.53 something like that. And it has
a nice mixture of equity and conservative posture. And so, if you don’t have the largest risk
tolerance in the world or if you’re meeting your equity needs in other areas, like, with an
S&P 500 Index Fund, this can be a moderate, single-ticker allocation that should give
you very consistent rates of return, it’s ten-year historical track record is actually 10%,
which is more like a full equity model portfolio. And within the equity sleeve, it has a
very concentrated mixture of individual stocks that’s then balanced out by conservative
things. So, just a very simple, very easy, low cost, great way to get invested.
Hill: Alright. Bill Mann, what you’ve got? Mann: I do the opposite. So, when I think
about mutual funds, when I think about people investing in active funds, what you really
want to be doing is investing in areas that maybe you don’t think you can do yourself
or that you structurally cannot do yourself. I talked about international stocks earlier
and I actually have a recommendation there, but the fund that I’m talking about is a micro-cap
fund called the Wasatch Micro Cap Fund and the ticker is WMICX. They have an unbelievable
20-year record, return of 13.2% per year over 20 years. Which I think, you would say is
actually indicative of a really remarkable investing process. A little expensive,
it’s 1.6% in terms of an annual fee, so. And they have $600 million in assets. And to me,
especially with small-cap funds, the asset base is something really, really important to think about,
because you want to make sure that you’ve got a fund where they don’t have so much money that they’re
running out of ideas. And that really happens a lot in the small-cap. So, I actually don’t
understand why this fund is as small as it is. Hill: Fantastic. We’re going to get to your questions in just a second. But first,
if you’re enjoying the video, please consider giving us a thumbs up. Give us a like.
It helps other people find the videos that we do and helps us keep doing more of these.
And again, fool.com/2020, if you want to get Tom Gardner’s report, his top stocks for 2020.
Let’s get to some of the questions that are coming in. Jim asks, “Why do people use basis points instead of percentages? It’s kind of confusing;
0.75% is 75 basis points.” I got to say, I’m a 100% with you on this one. Is this just,
like, this is how we’ve always done it in the mutual fund industry and so
we’re just going to keep doing it? Mann: Well, it may actually go back to one
of the things, when we founded The Motley Fool is, we wanted to get through some of the jargon.
And I would say that maybe ‘basis points’ is something that’s held on.
There actually is a pretty good reason. So, you’ve got something that’s at $10 and it goes up
0.75%, that’s different than going up 75 basis points. So, because you’re dealing in increments
of one — it’s actually a math term. But I kind of agree, but I’ve also kind of
signed on to calling them basis points. Gates: Yeah. And for me, when I’m speaking
with clients, I usually try to just do both, because some people know it as basis points,
some people know it as percentages. And it can get very awkward to say, 0.35%,
because then they might be like, was that 35%, so you just have to be careful. [laughs]
Mann: I think maybe we should pledge to stop using basis points right now. We’re in.
Gates: I’m down. Mann: Yeah, Jim, you’ve convinced us.
Hill: A question from Ryan, who asks, “For beginners, are mutual funds better than
buying starter stocks?” Great question. I’m not picking one way or the other, I will simply say,
in my own investing life, my first investment was an S&P 500 Index Fund.
Mann: I think it probably depends on your age as much as anything else. If you are a
20-year-old and you’re interested in getting out there and learning about the stock market
and learning about stocks, go buy a stock, right? Like, you don’t really need to be diversified
as a 20-year-old, because most of your earnings are ahead of you, right? But if you’re a little
bit older and you’re just starting to invest and even whether you want to learn or not,
I would get diverse as quickly as I could. So, I mean, I don’t know your exact situation
but that’s how I would think about it. Gates: And I think the only thing that I would
add is, so, risk tolerance is a critical thing. So, if you are a more conservative investor,
a mutual fund is going to give you a way to get exposure to a wide range of stocks,
so that you aren’t exposed to company-specific risk. So, that’s very important. And then
the other thing is, just from a kind of a behavioral perspective, buying an individual
stock can get you bought into the story and more willing to hold on to that stock and
that’s really critical. Whereas, if you own a random mutual fund that you don’t have any
association with, you might want to sell it at the first sign of trouble. And so, that’s
the only other thing I would mention. Mann: I thought that the financial planner
was about just to stab me when I started to, “Aah! don’t worry about me, I’m diversified!” Hill: Speaking of holding on to stocks,
one person asking, “You guys tend to say, you should buy stocks and plan to hold them for
5, 10, 15 years. Is that the same guidance for putting money in mutual funds?”
Mann: I think even more so. I think, actually, even more so. If you’re making the decision,
because if you think about mutual funds, these are asset allocation strategies, right?
So, you’re literally saying, “I’m going to have experts under my portfolio in this type of vehicle,”
which is a mutual fund, and so on. Yeah. So, it is even more so. These are
things that you just don’t need to be cute with and sell in-and-out of.
Gates: Yeah. I’m in full agreement. I think any investment dollars that are at-risk of
temporary loss, just from a human behavior perspective, should try to be
focused as long a term as possible. Mann: Yeah. Now, one thing that people do
do with mutual funds or they do do with financial planners is that they’ll make adjustments
year-in and year-out. They’ll say, “I want to be 10% in emerging markets, 25% in large
caps.” And so, at the end of a period, they’ll readjust so that they’re back to those percentages
— and that’s a different story — as opposed to buying and selling the entire instrument.
Hill: One viewer asked, “What do you think of target date funds? I’ve read that some people
think target date funds are too conservative.” Gates: This is a really good question, probably
in the weeds, so my personal opinion is, target date funds can be very conservative and the
reason for that is that this is being calculated usually around age, right? So, it’s saying,
okay, you are 20 to 25 years away from retirement — that’s backing into your age — and so
therefore you need a certain amount in bond or conserve of assets to protect the income
that you might need to turn on down the line. Where, in reality, they have no way of knowing
how much income you need to support from yourself off of your portfolio? So, you might be a
70-year-old investor and have a huge pension or a giant real estate empire and you don’t
need any income from your portfolios, you could be a 100% —
Mann: Beanie babies or something, right? Hill: [laughs] Beanie babies. So, you can be 100% in stock and then a target date
fund is going to really steer you wrong because most of them are not 100% stock.
Hill: Paul asked, “I’m big on investing in individual stocks, but I would like more
exposure to certain countries, like, India. Is there a way to get exposure to a single
country with mutual funds?” Mann: Yeah, there are India-target funds.
There are also ETFs that are single-country. And India is not even a particularly weird one,
you can get a Nigeria-focused ETF. The thing I would say about buying the individual
ETFs for smaller countries is they tend to be very heavily weighted towards the banks
and then whatever the big industry is for that country. So, in India, for example,
it would be textiles, it would be banks, so you’re not necessarily getting great exposure
to the growthiest parts of these markets. I actually had a second fund recommendation
that this might be a good place to put in, which was, the Driehaus Emerging Markets Fund,
the ticker is DREGX. Yeah. So, that’s a growth fund. So, they go to countries, like, India,
countries, like, China. Anything that’s in the MSCI Growth Index. And they spread their
bets across there in the more promising industry. So, yes, so you can get exposure to India
through single funds. I would be really careful about what’s in those funds, because you don’t
necessarily want to be invested in a bunch of Indian banks.
Hill: A couple of people asking about the basic difference between mutual funds and ETFs,
and we may have glossed over that earlier in this. Mann: We totally glossed over it, no thinking about it.
Hill: So, if someone were to ask you, “What is the difference between
a mutual fund than an ETF?” Mann: The basic difference is that an ETF
trades like a stock. You can buy and sell it all day long. Which is good or bad, right?
But ETFs are meant to be traded on the exchanges when the exchanges are open, whereas mutual
funds are not meant to be trading vehicles. They tend to have actually much lower turnover
for the instrument itself. And they are only cast at the end of the day.
Hill: Jerry, asks — actually, we’ll get to that in a second. Ashley asked,
“I’m very new to investing –” Mann: Sorry, Jerry. [laughs]
Hill: We’ll get to you, Jerry, hang in there. “I’m very new to investing, literally started
two weeks ago and I found your website very helpful.” Thank you very much! We actually,
the three of us, designed the website, so. Mann: And wrote it.
Hill: The question is, “With the coronavirus and concerns over a global emergency,
are you worried about that negatively affecting stocks and funds?” It’s a great question.
And particularly with earnings season going on right now, we’ve already seen big name
companies, like, Apple, Starbucks, McDonald’s talk about the effect of the
coronavirus on their business in China. Mann: Yeah. Worried? Nope. But it will happen.
I mean, it’s going to happen. Every single country that has any exposure to China is
going to have to talk about it. So, today they announced that European airlines are
no longer flying to China. Russia has closed its border with China. So, yeah, it’s going
to be absolutely an impediment to global trade. But over the long-term, I mean, think about
the effect now of what the SARS virus was, I mean, over the long-term it’s
not going to be a very big deal. Gates: And I would say, this is actually a
pretty important question, especially as you’re going started. And again, thank you and congrats
on getting started. It’s important. But actually, if you look back at past pandemics, especially
the SARS virus, the stock market actually just went straight up during the SARS virus.
And so, you can’t necessarily use these types of things as an indicator for how you should
be investing. If you’re just getting started and you’re relatively young, you want to be
thinking in multi-year periods of time. It’s seductive to want to think, that you can say,
there’s this pandemic coming, I should be out of the way so that I avoid that temporary dip.
You want to start building the characteristic of holding through whatever
dip may come from the moment. Mann: Or actually even buying
during fear. Gates: Yeah, totally. Hill: Alright. Let’s get to Jerry’s question.
Jerry asks, “Does The Motley Fool have their own mutual funds that they manage?”
The answer is, yes. Which leads to my second disclaimer about Motley Fool Asset
Management, which is where the funds are sold. Mann: It’s another sister.
Hill: It’s another sister company. This is not the offer for sale of any security or funds.
Motley Fool Asset Management is a separate sister company of the Motley Fool LLC. And it manages
mutual funds as well as the Motley Fool 100 ETF based on conviction ratings from
The Motley Fool’s analysts. All investing, including ETF investing, involves risks and
possible loss of principal. For viewers, who are not shareholders of the fund, you should
consider the fund’s investment objectives, risks and expenses carefully before investing.
Prospectus of this and other information and all the information on the holding is available
at MFAM Funds’ website. Please read the prospectus carefully before investing;
as you always should. I’m pretty sure we’re going to put all of the stuff
that I just said down in the description below. So, there you go.
Gates: Is it weird that I found myself, like, looking down in guilt as you read the disclaimer?
Hill: [laughs] Is that normally your — Mann: [laughs] It does sound like
lawyer’s statement, “My client is-” Hill: More questions from the audience. Chelsea
asks, “Can I buy American funds from Kenya?” Mann: Oh, that’s such a great question.
The answer is — yeah, I mean, you have access through your local brokers in countries around
the world to a wide array of funds. Now, usually the fund companies — I can actually speak
directly to this, because of my knowledge of Motley Fool Asset Management was, that
we were only supposed to sell to people who had addresses in the United States of America.
There’s a lot of reasons that you might have an address that is available to you in the
United States, so if you have access to a U.S. bank account, you are
able to buy U.S. funds. Hill: Great question from Chuck, who asks,
“Would you suggest someone use a Roth or traditional IRA if they are starting
out with mutual funds or ETFs?” Gates: So, I think it’s less about whether
you’re starting out with mutual funds or ETFs and more about what type of growth profile
are you looking for? And what I mean by that is, a Roth has very specific tax advantageous
nature, in that, any growth inside of the account, you achieve tax-free and when you
take it out, you don’t have to pay income tax on that growth or the principal contributions.
With a traditional IRA, you’re saving pre-tax, meaning you get a little bit of a tax deduction
as those dollars go in and then it grows tax-free. But when you take it out, you have to pay
income tax on it. And so, just depending on what your situation is and what profile you
are looking for from tax advantageous structure, that would be one good
way to think about it. Mann: I have something else to say to Chelsea
from Kenya. If you go to a Kenyan brokerage, they will have mutual funds that are based
in Kenya that have exposure to U.S. stocks. So, you can do it that way too.
Hill: Great. One person asking a question about benchmarks, and we talk about this all
the time, particularly when we’re talking about stocks and we like to compare our returns
with our stock portfolio to that of the S&P 500. One viewer asking, “When looking at mutual funds,
does the benchmark change depending on the fund?” Mann: Absolutely.
And it should, because if you’ve got a fund that is all micro-caps,
they are not necessarily trying to beat the S&P 500, right, they are trying to beat a
relevant micro-cap. Or if you’ve got a fund — as we were asked about India earlier, like
the Indian stock exchange will perform vastly differently than the S&P 500 will. So, it’s
impossible to know whether the fund company has done good or bad based on the S&P 500.
So, it matters a lot. The one thing that I would say, as a red flag for mutual funds
and mutual fund companies is, if they change their benchmark a lot, which is in their prospectus,
it may be that they’re, like, trying to move their targets. So, the key is, if they
pick a benchmark and stick with it. Gates: Yeah. I think I would add that I’m
a little bit nervous lately because everyone is starting to benchmark everything against
the S&P 500, and things are different. So, if you’re in an international mutual fund,
it can’t be true that your benchmark is the S&P 500; even though many people are defaulting
to that. And so, you just have to be careful — there’s a lot of concentration in the S&P 500.
Even if you took — something that we haven’t mentioned, but — a very attractive
passive index fund, the Vanguard Total Market Fund, right, that’s a great fund and it has diversification
inside of it: Large-cap, medium-sized companies, small-cap, etc. If you compared
it against the S&P 500, it’s done worse over the last few years because the S&P 500 has
done so well, it’s crazy. And so, you just have to be careful of what you’re
choosing your benchmark against. Hill: One viewer asking, “Is there really
a big difference between an expense ratio of 0.75% and 1.25%?” I mean, 0.5%,
what does that mean over the long-term? Mann: Over the long-term — we always think
of returns as being temporary. I mean, return can reverse itself, and expense is for real,
right? It’s getting taken out whether the fund has done really well or whether it has
done poorly. As a rule of thumb, you want those expenses to be as low as possible, because
even 1% difference, that doesn’t sound like very much, if you take that compounded over
time, it’s a pretty substantial difference. Gates: Yeah. I mean, compounding is the key there.
Even 0.5% compounded over many years can add up to — depending on the portfolio size —
several tens of thousands of dollars, even hundreds of thousands
of dollars of loss of value. Mann: Yeah. Which is to say — again, I’m not
afraid of funds that have higher expense ratios, but it’s got to be worth it.
Gates: Yeah. Hill: You are afraid of spiders though?
Mann: Deathly. [laughs] Hill: Alright, Bill Mann, Sean Gates, thanks
for being here. Thank you so much for watching! Thanks for giving us a thumbs up to help spread
the word about the video. We appreciate it. And again, fool.com/2020, if you’re looking
for Tom Gardner’s top stocks for 2020. Check that out when you get a chance. I’m Chris Hill.
Thanks again for watching and we’ll see you next time.