Asset Allocation using ETFs
Use Asset Allocation in combination with zero-cost ETF trades at Zecco Trading to build a diversified, low cost basis IRA portfolio!
You can get 10 free trades a month when you maintain a $25,000 balance or execute 25 trades each month (with additional trades just $4.50 each), so it could cost you nothing in commissions to set up a diversified portfolio.
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So let's dig right in and see how a Zecco Trading IRA funded with zero-cost trades in ETFs can work for you...
Below you'll find a table that spells out the differences between investing in a diversified mutual fund portfolio and a portfolio of ETFs built with zero commissions. The portfolios were built using a standard asset allocation model for a 25 year old retiring at 69, with maximum annual contributions adjusted for inflation and compounded annually. For more information on asset allocation models, click here.
Comparison Chart
| Vanguard Large-Cap Index Fund |
W |
Large Company Equity |
45% |
0.07% |
| Vanguard Small-Cap Index Fund |
VBR |
Small Company Equity |
35% |
0.12% |
| Shares MSCI EAFE Index Fund |
EFA |
International Equity |
20% |
0.35% |
| Weighted Expense Ratio |
0.14% |
| Legg Mason Value Prim |
LMVTX |
Large Company Equity |
45% |
1.68% |
| Fidelity Advisor Small Cap T |
FSCTX |
Small Company Equity |
35% |
1.51% |
| Templeton Growth C |
TEGTX |
International Equity |
20% |
1.79% |
| Weighted Expense Ratio |
1.64% |
| Difference in Expense Ratio: |
1.50% |
1. Expense ratio data obtained from the ETF Screener at www.smartmoney.com, as of December 19, 2006.
2. Expense ratio data obtained from the Mutual Fund Screener at www.smartmoney.com, as of December 19, 2006.
***All securities are offered through ZeccoTrading, Inc., a fully disclosed broker/dealer and member of the FINRA and SIPC.
As you can see, the difference in expense ratios between this actively managed mutual fund portfolio and a low cost ETF portfolio is 1.5%. Because expenses are subtracted directly from the underlying fund returns, the underlying mutual fund portfolio holdings would have to outperform the underlying ETF portfolio holdings by 1.5% to achieve the same total returns. That's a tall order.
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