Jeremy from Generation X Finance left the following comment on my last post:
Thatâ€™s very true, and it is obvious that when all things considered are the same, no up front load and lower expenses will add up to a significant difference over time. But, what about a real world example, comparing two funds with the same investment objective, tracking past historical results?
For example, just quickly I went and looked at a few income funds I have heard of and know perform fairly well. Both are conservative allocations, both have a somewhat similar investment mix, both are 5-star morningstar rated and have ranked in the top 10 of income funds for the past 1, 3, 5 and 10 year periods.
Iâ€™m looking at:
No-load obviously on vanguard, and a 0.25 expense ratio. Franklin has a front-load of 4.25% and 0.65 expense ratio. Looking at the past 10 years:
3-Year Annualized 11.99
5-Year Annualized 11.64
10-Yr Annualized 9.52
3-Year Annualized 8.45
5-Year Annualized 6.72
10-Yr Annualized 8.66
Now, these are total returns, not counting the loads/expenses, but in comparing two of the top funds with the same investment objective, in this case would the load and higher expense ratio be more beneficial in the long run?
I donâ€™t know, Iâ€™m at work and donâ€™t have the time to calculate anything, but could you plug these numbers into your spreadsheet and see how they compare JLP? Iâ€™m curious to see how it works out when comparing them with say a 5 and 10 year annualized return for these specific funds.
Here are the results using the numbers provided above:
As you can see, the Franklin Templeton Income Fund SMOKED the Vanguard Wellesley Income Fund for both time-periods. What does this show us?