Just a quick idea to save you some money and help you avoid Enemy #1.

If you own a Large Cap US mutual fund, swap it for the exchange traded fund Vanguard Total Stock Market (symbol: VTI). If you have an overseas/europacific fund, try the Vanguard All-World ex-US ETF (symbol: VEU) instead. You’ll likely save a lot on annual expenses and you may even increase your returns substantially. Plus you won’t have to deal with that icky brokerage firm anymore.

Here’s a comparison of VTI vs. the Growth (or gross) Fund of America (AGTHX). Note that the 5.75% broker commission is not taken out of the chart.

Click for larger view.

Here’s VEU vs. Europacific Growth Fund, also from American Funds, and a favorite high-commission product of brokers.

Click for larger view.

You can do this through Vanguard very cheaply. Just remember to keep a close eye on your portfolio manager to make sure they’re working hard. By the way, YOU are the portfolio manager.

Of course you always have the choice of hiring an independent fee-only manager. But I digress…

Instead of buying and holding these ETFs, you may also want to try something tactical to improve your results or reduce your volatility. Here are few ideas from Morningstar.

Good luck with whatever you choose!

If your money is with Edward Jones, Ameriprise, Morgan Stanley Smith Barney, Merrill Lynch, or any other memeber of SIFMA, you already have.

These firms continue to fight tooth and nail against the fiduciary standard of care, i.e. doing what it’s their clients’ best interests.

Does that make you angry? Then do something about it, like move to another firm…

Here’s more:
Lobbying May Kill Fiduciary-Rules Plan for Brokers

See the link below for a great whitepaper from Morningstar on several rules-based (quantitative) ETF strategies. They follow my general rules about investing:

1- Model – use simple rules that have been tested over time
2- Efficiency – eliminate as much drag as possible (i.e. don’t pay for product, pay for process)
3- Automate – systematize as much as possible (like hiring my firm to do it for you)

Many of you will recognize some of the ideas and techniques they use (like Simple Moving Averages). I use similar methods for a couple of my model portfolios.

The other big takeaway is their focus on ETFs. If you currently have a portfolio of mutual funds, it would likely save you a good amount of money by switching to an ETF of the same asset class or sector. Just another way to be more efficient.

Click here for the paper. (Thanks to Mebane Faber for the link/PDF!)