Can someone explain how to figure in "expense ratio" in deciding whether to go with a type of retirement fund?

Question

I'm 32, and I'm trying to decide whether to continue to invest my IRA in a S&P index fund with a 0.1% expense ratio or go with a "auto-diversified" fund that adjusts continually based on my age with a 0.78% expense ratio. I just don't think I have to patience to "diversify" my retirement account myself more than once every 6 months or so. Thanks.

Answer 1

Anything under 1% is basically a sign that the fund are not ripping you off.  The index fund will, in all likelihood, outperform the managed fund over a period of 15-20 years or more...

Answer 2

The expense ratio is what is taken out of your account every year, and it goes into the fund manager's pocket. So lower=better.

Since an actively managed fund can't beat a passively managed fund (like an index fund) on average, and since index finds have the lowest expense ratios, you should invest in index funds.

Fortunately, you don't need to rebalance more than once a year or so in order to stay diversified, so there's no need to rely  on a fund manager charging you ridiculous fees to do it for you.