STETZ - BlackRock LifePath 2040 Institutional

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BlackRock LifePath 2040 Institutional (STETZ)
Expense Ratio: 0.85%
Expected Lifetime Fees: $25,708.96

The BlackRock LifePath 2040 Institutional fund (STETZ) is a Target Date 2036-2040 fund started on 03/1/1994 and has $768.00 million in assets under management. The current manager has been running BlackRock LifePath 2040 Institutional since 05/22/2007. The fund is rated by Morningstar. This fund does not charge 12b-1 fees.

MarketRiders Prefers The Following ETF

iShares S&P Target Date 2040 (TZV)
Expense Ratio: 0.11%
Expected Lifetime Fees: $3,595.26

The iShares S&P Target Date 2040 (TZV) is an Exchange Traded Fund. It is a "basket" of securities that index the Target Date 2036-2040 investment strategy and is an alternative to a Target Date 2036-2040 mutual fund. Fees are very low compared to a comparable mutual fund like BlackRock LifePath 2040 Institutional because computers automatically manage the stocks.

The Following Target Date 2036-2040 Funds Have Lower Fees Than BlackRock LifePath 2040 Institutional (STETZ). Why are these metrics important?
Mutual Fund Name Ticker Symbol Turnover Assets (M) Annual Fees
AllianceBern 2040 Retirement Strat I LTSIX 12.0% 125 0.76%
American Century LIVESTRONG 2040 Instl ARDSX 5.0% 325 0.72%
American Funds Trgt Date Ret 2040 A AAGTX 1.0% 1,000 0.77%
American Funds Trgt Date Ret 2040 R4 RDGTX 1.0% 1,000 0.78%
American Funds Trgt Date Ret 2040 R5 REGTX 1.0% 1,000 0.48%
American Funds Trgt Date Ret 2040 R6 RFGTX 1.0% 1,000 0.43%
Fidelity Advisor Freedom 2040 I FIFFX 14.0% 1,600 0.77%
Russell LifePoints 2040 Strategy R1 RXLRX 23.0% 131 0.84%
Russell LifePoints 2040 Strategy S RXLSX 23.0% 131 0.84%
Russell LifePoints 2040 Strategy S RXLSZ 23.0% 131 0.84%
Schwab Target 2040 SWERX 3.0% 388 0.84%
T. Rowe Price Retirement 2040 TRRDX 15.9% 7,900 0.76%
Vanguard Target Retirement 2040 Inv VFORX 15.0% 6,800 0.19%
Wells Fargo Advantage DJ Target 2040 I WFOSX 20.0% 1,200 0.52%

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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.