RetireJapan

Say you have a compounding investment plan where you invest 10000 a year and that is making 3.5% a year after costs. After 40 years that's worth 875k. Now imagine you make a bunch of small "convenient choices" like choosing something that gets doubles taxed, something that avoids manual rebalancing etc, and it "only" brings you down 0.5% to 3.0% annual... your final balance is 776k. Or 100k less. Considering the size of the stakes for .5% difference in returns I think it's worth spending some time to make sure you're using the cheapest options available

I completely agree with you on the importance of minimizing expenses. However, you should understand what’s driving the big differences in your example. The very long 40 year period of compounding accentuates the effect of even a small yearly expense of 1% or less. I am 56 and I can only hope I enjoy 40 more years of compounding. Try your example for 20 or even 30 years and note the difference. The other key factor in your example is that relatively low 3.5% yearly return. A 7% yearly return is a fairly conservative projection for a pension fund and the US market long term returns are 10-11% (before inflation, but then so is that fee).

Merican wrote: ↑Tue Mar 05, 2019 12:04 pm Thank you jcc. Good reminder that small fees can really add up over time.

BTW, here is the most current asset allocation that we plan on using with an account at SBI Securities:

65% ｅＭＡＸＩＳ Ｓｌｉｍ全世界株式（除く日本） 0.15336% (World Stock Fund Excluding Japan)
10% ｅＭＡＸＩＳ Ｓｌｉｍ国内株式（ＴＯＰＩＸ） 0.17172% (Japan Stock Fund)
15% ｅＭＡＸＩＳ Ｓｌｉｍ先進国債券インデックス 0.18360% (Developed Countries Bond Fund)
10% ｅＭＡＸＩＳ Ｓｌｉｍ国内債券インデックス 0.15012% (Japan Bond Fund)

Overall Expense Ratio 0.15941%

The plan has changed quite a bit since my initial post because of the great points posted above in this thread. Thank you all for your feedback.

Looks great to me, bond allocations are definitely a personal thing, I don't have any jp bonds but can understand why you might want some mixed in. You can actually do a little better but with more work if you separate the world into 先進国　and 新興国 according to market share, but it does add another thing to rebalance and is a small difference(maybe 0.02%?)

TokyoWart wrote: ↑Tue Mar 05, 2019 2:36 pm A 7% yearly return is a fairly conservative projection for a pension fund and the US market long term returns are 10-11% (before inflation, but then so is that fee).

10-11% returns? Not unless you pick out a favourable period(e.g. the last 10 years) and wilfully ignore the downturns(e.g. the lost 00's before it).

Real pre-inflation returns can be something like 7-8 and then you take away inflation. This is why many of the "safe withdrawal" methods quote something like 3.5-4%

Less is less. Whether you're saving 100k or 10k, I think it's worth putting a bit of time into making sure you get it right and aren't bleeding money to middle-men. If we're looking at another flat decade, that 0.5% could be a massive drag

Try this calculator

https://dqydj.com/sp-500-return-calculator/

S&p500 index returns (before inflation) are easily 10-12% annually for periods of 40-60 years. We’ve actually just come through a period of lower returns from about 2001. Unfortunately this only seems to hold true for the US market (where more data is available and world events have favored one country’s economy).

I completely agree with you that we don’t know the future and caution is warranted.