LTEIX - AllianceBern 2015 Retirement Strat I

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AllianceBern 2015 Retirement Strat I (LTEIX)
Expense Ratio: 0.68%
Expected Lifetime Fees: $20,934.82

The AllianceBern 2015 Retirement Strat I fund (LTEIX) is a Target Date 2011-2015 fund started on 09/1/2005 and has $228.50 million in assets under management. The current manager has been running AllianceBern 2015 Retirement Strat I since 09/23/2005. The fund is rated by Morningstar. This fund does not charge 12b-1 fees.

MarketRiders Prefers The Following ETF

iShares S&P Target Date 2015 (TZE)
Expense Ratio: 0.11%
Expected Lifetime Fees: $3,595.26

The iShares S&P Target Date 2015 (TZE) is an Exchange Traded Fund. It is a "basket" of securities that index the Target Date 2011-2015 investment strategy and is an alternative to a Target Date 2011-2015 mutual fund. Fees are very low compared to a comparable mutual fund like AllianceBern 2015 Retirement Strat I because computers automatically manage the stocks.

The Following Target Date 2011-2015 Funds Have Lower Fees Than AllianceBern 2015 Retirement Strat I (LTEIX). Why are these metrics important?
Mutual Fund Name Ticker Symbol Turnover Assets (M) Annual Fees
American Century LIVESTRONG 2015 Instl ARNIX 4.0% 892 0.58%
American Funds Trgt Date Ret 2015 R5 REJTX 7.0% 1,500 0.42%
American Funds Trgt Date Ret 2015 R6 RFJTX 7.0% 1,500 0.38%
Fidelity Advisor Freedom 2015 I FFVIX 19.0% 1,700 0.62%
T. Rowe Price Retirement 2015 TRRGX 15.2% 6,600 0.65%
Vanguard Target Retirement 2015 Inv VTXVX 27.0% 15,200 0.17%
Wells Fargo Advantage DJ Target 2015 I WFSCX 40.0% 806 0.49%

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Why Are These Metrics Important?

Turnover represents how much of a mutual fund's holdings are changed over the course of a year through buying and selling. Active mutual funds have an average turnover rate of about 85%, meaning that funds are turning over nearly all of their holdings every year. A high turnover means you could make lower returns because: 1) buying and selling stocks costs money through commissions and spreads and 2) the fund will distribute yearly capital gains which increases your taxes. Look for funds with turnover rates below 50%. For comparison, ETF turnover rates average around 10% or lower.

Generally, smaller funds do better than larger ones. The more assets in a mutual fund, the lower the chance that it will beat its index. Managers outperform an index by choosing stocks that are undervalued. In order to find these undervalued stocks, the manager has to know more than his competitors to develop an "edge." There are only a finite number of stocks a mutual fund manager can reasonably analyze and actively track to gain such a competitive edge. When the fund has more assets, the manager must analyze large companies because he needs to take larger positions. Large companies are more efficiently priced in the market and it becomes increasingly difficult to get an edge.