From 24/7 Wall St. · Ryne Mauck · · 1m
Adviser Fees Drain Bond Income
Three ETFs keep bond income after 1% adviser fee takes 25% of earnings.
In brief
Three ETFs keep bond income after 1% adviser fee takes 25% of earnings. A 1% advisory fee on bonds yielding 4% removes 25% of income annually; three low-cost ETFs reduce this cost to 0.07%. Originally reported by 24/7 Wall St..
The Fee Problem
A 1% advisory fee on bonds earning 4% takes 25% of your income annually.
“A 1% advisory fee taken from a portfolio yielding roughly 4% amounts to a quarter of your income, gone before it ever reaches your checking account.”
The Math
On $500,000 portfolio, $20,000 annual income loses $5,000 to adviser fees.
“A 1% assets-under-management fee pulls $5,000 out of that same balance.”
VCIT ETF
Vanguard Intermediate-Term Corporate Bond ETF earns 5% yield with 0.03% expense ratio.
“VCIT tracks investment-grade u.s. corporate bonds with 5 to 10 year maturities.”
VGIT ETF
Vanguard Intermediate-Term Treasury ETF offers 4% yield with 0.03% expense ratio.
“VGIT holds u.s. treasury notes with roughly 3 to 10 year maturities.”
HDV ETF
iShares Core High Dividend ETF provides 21.88% growth with 0.08% expense ratio.
“HDV holds roughly 75 u.s. dividend-paying stocks screened by morningstar for financial health.”
The Trade-Off
DIY bond sleeve avoids adviser fees but lacks rebalancing and tax strategies.
“A three-fund diy sleeve saves you money. It does not rebalance itself, harvest tax losses, coordinate withdrawals against your social security claim.”
The Solution
Three ETFs keep 93% of bond income after 1% adviser fee takes 25%.
“Three tickers, seven cents of blended expense per $100 invested, and the income stays yours.”
The essence
A 1% advisory fee on bonds yielding 4% removes 25% of income annually; three low-cost ETFs reduce this cost to 0.07%.
