As readers of my Champion Funds newsletter service are well aware, I am a dyed-in-the-wool investing cheapskate. The Aggressive, Moderate, and Conservative model portfolios I've constructed for subscribers over the past year boast expense ratios of just 0.74%, 0.67%, and 0.52%, respectively.
Compare that with your brokerage bills and call me in the morning.
The finer things
I'm a bargain hound in other aspects of life, too. It's not that I don't appreciate the finer things; it's just that I don't want to pay an arm and a leg (and perhaps some other bodily part) for the sake of owning them.
As a result, though we became a two-car family in anticipation of little Penny Lou's arrival nearly 17 months ago (hard to believe), my main ride is still the Honda Civic I bought back in graduate school nearly 10 years ago (also hard to believe). Almost 150,000 miles later, that little silver bullet is still going strong.
But perhaps nowhere is my, um, skinflintiness more evident than when it comes to investing. Like my colleague Philip Durell -- who runs point on the Fool's Inside Value newsletter -- I love a good investment bargain. And there's lately been lots of good news for me and my fellow fund fans on that front: Fees are on the decline.
Why so? Well, for starters, thanks to the fine foot- and spadework of Eliot Spitzer and his crack crew of investigators -- with, I'll admit, some assistance from the Securities and Exchange Commission -- many of the firms implicated in the fund industry's trading-abuse scandal have agreed to cut their funds' expense ratios.
Get a clue
Moreover, price pressure from exchange-traded funds (ETFs) has also helped the tightwad cause. When popular index trackers such as Vanguard Total Stock Market (AMEX:VTI), which shadows the MSCI U.S. Broad Market Index, and Cubes (NASDAQ:QQQQ), which follows the Nasdaq 100, can be had for as little as 0.13% and 0.2%, respectively, it was only a matter of time before fund companies got a clue and cut their prices down to size, too.
Fidelity's moves have perhaps been the most dramatic: The Boston-based money management behemoth made permanent fee reductions a few months back. Among other things, that means that investors in Fidelity's S&P-tracking Fidelity Advantage Class Spartan 500 Index (FUND:FSMAX) will now pay just a measly seven basis points (0.07%) a year.
Not to be left behind is Vanguard, the house that Jack Bogle -- a cheapskate's cheapskate -- built. Yes, Vanguard Total Stock Market still goes for a relatively pricey 0.19%, but the shop's ETFs, like VTI above (which they've dubbed "Vipers"), are dirt cheap and getting cheaper.
Actively managed bargains
There are certainly bargains to be had among actively managed funds, too. For reasons I explain here, I'm a big believer in the Foolish wisdom of owning both active and passive funds. Therefore, in addition to dishing the inside scoop on index-fund and ETF investing, each issue of Champion Funds features what we like to call the Fund of the Month.
These are the best of the money management industry's actively managed best, cherry-picked keepers of all market-cap sizes and styles. And in the context of a well-constructed portfolio, each of 'em, I should hasten to add, is worthy of a portion of your nest egg. Not for nothing do we dub these funds Champs.
The full list of recommendations is just a free trial away, but, by way of a taste test, here's one that might whet your appetite: Dodge & Cox International Stock (FUND:DODFX).
Since making its Champion Funds debut back in our June 2004 issue, the fund has pole-vaulted over the competition, sprinting past the S&P 500 by more than 35 percentage points. It's also shellacked the MSCI EAFE, a benchmark that is essentially the S&P of international equities and a good proxy for the fund's style.
Success here owes to a number of factors. First, the folks running the fund's money have an average of 16 years' experience, and its senior manager has been with the highly regarded Dodge & Cox firm since back when Richard Nixon was president.
Second, the fund's strategy is one that investing cheapskates should love: The team hews to a valuation-conscious style that leads to such relatively low price-to-earnings picks as GlaxoSmithKline (NYSE:GSK), Sanofi-Aventis (NYSE:SNY), and Royal Dutch Petroleum (NYSE:RD), which trades at a discount to the broader market as well as to such energy sector competitors as Sunoco and BP.
Last but not least, here's a salient detail that's sure to get the hearts of investing cheapskates positively afluttering: The price tag for Dodge & Cox International is just -- are you sitting down for this? -- a mere 0.77%.
See you on the blue-light aisle -- and on the Champion Funds boards!
This commentary was originally published on April 19, 2005. It has been updated.
Shannon Zimmerman is the lead skinflint for the Fool's Champion Funds newsletter service, which you can test-drive free for 30 days. Shannon owns shares of Vanguard Total Stock Market. GlaxoSmithKline is a Motley Fool Income Investor recommendation. The Motley Fool has a disclosure policy.
