I'm 27, looking to start planning for retirement. My company has an arrangement through The Hartford group for our 401K and I read your article on Fund Level Expenses and how the broker will be earning compound interest on MY compound interest. I also ran across this article while researching:(and it also links to a Mutual Fund Expense Analyzer that might be handy for other Consumerist readers). The article is talking about getting yourself involved in an Index Fund that would have fee's of around .19% or so and going it alone.

Most of the 16 investment options I have through The Hartford have a fee of over 1% (many over 1.25%)...

But to undertake the medium-high risk plan I've devised, I am able to keep my fee's around .91%. I'm about 30-35 years from retirement, and of course I'd like to get the most bang-for-my-buck. But I'm really REALLY green in this area. Now, my company DOES offering matching up to 3% of my wage, and will then match HALF of what I contribute up to 5%...so for every 5% I invest, they'll match 4%.

I don't know how to calculate all this, but I need to know if I'm better off sticking with my matching plan in my company, or if I should go it alone with something that has a much smaller fee? I don't have a lot of up front capital to invest, so maybe that means I wouldn't even HAVE the option of going it alone. But I'm also hoping to move in about 4-5 years from where I live, and I would have to change companies to do so...so I doubt I'd be fully vested by then, but I figure that starting something now is better than nothing.

If you don't feel able to point me in the right direction, I've read a lot of comments about other investors on the site and was hoping you could pose this to them as well so I could get some feedback.

Thank you!

Matching policies vary by plan so you'll have to read the plan documents very carefully to figure out what's up. UPDATE: But you should probably take the match while you work there, then roll it over into a 401k after you leave and invest it in whichever low-fee fund you like. I'm going to go ahead and assume that your employer won't continue to match after you don't work for them. Since you think you'll only be around there for 4-5 years, you're probably better off going with a low-fee fund. While the employer won't keep matching your investment, the fund will still keep chomping away at your capital through its compounding fees.

For more information on how seemingly innocuous fund fees can devour most of your retirement fund, read our previous post, "How Your 401(k) Is Ripping You Off."

(Photo: Getty)

Transparent Investing [Official Site]

The expense ratio is the operating cost of a fund, including fees (or "loads"), and it is passed on to investors.

Expense ratios are expressed in a percentage. For example, a $10,000 investment with a 0.2% expense ratio results in $20 in yearly expenses (100,000 * .002).

Funds with lower expense ratios are seen by some as delivering better investor value. For this reason, many are attracted to "no-load" index funds and no-load index exchange traded funds (ETFs), which are managed mainly by a computer.

Recently, we plunked down a chunk in our first mutual fund, the Vanguard 500, a no-load index fund that tries to mirror the performance of the S&P 500, and has an expense ratio of 0.18%

For further discussion, check out:
An Argument For Index Funds
Comparing Index ETFs and Mutual Funds

— BEN POPKEN

(Photo: Getty)

MyMoneyBlog says to look at the index ETFs Historical Bid/Ask Spread Values and the mutual fund's NAV (Premium or Discounts to Net Asset Value).

Since ETFs are by definition traded on an open exchange, there can be differences between what people are currently willing to pay (the "bid" price), and what people are willing to sell at (the "ask" price). Even if you assume the ETF is priced correctly at it's inherent value, this bid/ask spread means you will be overpaying a bit when you buy, and losing a bit when you sell...

...NAV is simply the value of the shares of the mutual fund minus any liabilities like expense ratio. A mutual fund always trades once a day, exactly at its NAV.

We'll admit we don't really know much about this particular subject, but we've bookmarked it for when we're older. The post also has links to different sites that reveal different fund's historical data. — BEN POPKEN

Tools For Evaluating Index ETF vs. Mutual Fund Purchases [My Money Blog]
(Photo: Getty Images)

The kicker? Paying more for such a fund doesn't earn you more, it actually helps to ensure your results are less than what you could have otherwise. The details from SmartMoney Magazine...

When you pay a load, you're essentially paying for advice. A load is really just a sales charge you pay for buying a fund that's available only through brokers and financial advisors — unlike, say, a Vanguard fund, which can be purchased directly from the company with no additional charge. So if the guidance you're getting from your broker is helpful, it may be worth the price tag. But if you're comfortable investing on your own, then you probably need it about as much as a fish needs swimming lessons. While there are many good funds out there that charge a load — including those from American Funds, which are known for their reasonable expense ratios and solid team management — there's also no shortage of solid no-load (and low-cost) alternatives. Cost shouldn't be your only driver when it comes to fund selection, but higher fees can lead to weaker performance. It's not easy to beat a comparable no-load fund when you're starting $575 in the hole.

You're just as good as plenty of pros at selecting mutual funds.

The brokers' choices are more expensive. And they have lower returns too.

Load Funds [Ask Smart Money]

Index funds are a type of collective investment that attempts to mirror the performance of a particular financial market. For instance, the S&P 500 or the Vanguard MidCap Index. Index funds are often automated and can achieve significant investor savings by virtue of their lack of over human involvement.

FMF finds index funds:

• deliver higher returns
• (partially attributable to their low cost)
• require less time to manage
• and are easy to manage

This is why The Motley Fool calls index funds, "a wonderful option for the know-nothing investor."

That about describes our aptitude. Maybe these bear looking into. — BEN POPKEN

Why I Like Index Funds [FreeMoneyFinance]