The doorbell rings. A sharply dressed man stands outside. “I sell Colgate toothpaste,” he says. “You have to see this stuff.”

He opens the briefcase and pulls out a tube of Colgate Total. “This tube costs $700,” he says. “The average person uses 3 tubes a year, so you could have lovely white teeth for just $2,100 a year.” Most people would laugh. But fools are born every minute. A few people in China are even buying British air.

Perhaps even crazier, plenty of Americans have invested in the Ryder S&P 500 Class A Index Fund. It charges a 4.75 percent commission. It also costs a further 1.55 percent per year. That’s worse than buying British air or pricey tubes of Colgate. Vanguard offers its S&P 500 index. It’s the same thing for less. In fact, anyone who started to invest $5,500 a year into Vanguard’s S&P 500 Index on October 31, 2006 would have $105,475 ten years later. If they bought the Ryder S&P 500 Class A Index Fund instead, they would have just $81,886. That’s a difference of $23,589 for the exact same product. That kind of difference would buy 14,210 tubes of Colgate at Target.

But times are changing. Vanguard isn’t the only firm that offers low-cost index funds. In fact, Fidelity’s Premium series of index funds (they require a minimum of $10,000 per fund) now cost less than Vanguard’s Admiral Series Indexes.

Fidelity’s Premium Share Indexes Now Cost Less Than Vanguard’s

Fidelity Index Funds
Premium Share Class - $10K Minimum Investment
Vanguard Index Funds
Admiral Share Class - $10K Minimum Investment
Fund Name Comparison Based on Expense Ratio Fund Name
Fidelity® 500 Index Premium ( FUSVX ) .045% .050% Vanguard 500 Index Admiral (VFIAX)
Fidelity® Total Market Index Premium ( FSTVX ) .045% .050% Vanguard Total Stock Mkt Index Admiral (VTSAX)
Fidelity® Extended Market Index Premium ( FSEVX ) .070% .090% Vanguard Extended Market Index Admiral (VEXAX)
Fidelity® Large Cap Growth Index Prm ( FSUPX ) .070% .080% Vanguard Growth Index Admiral (VIGAX)
Fidelity® Large Cap Value Index Prm ( FLCHX ) .070% .080% Vanguard Value Index Admiral (VVIAX)
Fidelity® Mid Cap Index Premium ( FSCKX ) .070% .080% Vanguard Mid Cap Index Admiral (VIMAX)
Fidelity® Small Cap Index Premium ( FSSVX ) .070% .080% Vanguard Small Cap Index Admiral (VSMAX)
Fidelity® International Index Premium ( FSIVX ) .080% .090% Vanguard Developed Markets Index Admiral (VTMGX)
Fidelity® Global ex US Index Premium ( FSGDX ) .110% .130% Vanguard FTSE All-Wld ex-US Index Admiral (VFWAX)
Fidelity® Total Intl Index Premium ( FTIPX ) .110% .120% Vanguard Total Intl Stock Index Admiral (VTIAX)
Fidelity® Emerging Markets Index Premium ( FPMAX ) .140% .150% Vanguard Emerging Mkts Stock Index Admiral (VEMAX)
Fidelity® Real Estate Index Premium ( FSRVX ) .090% .120% Vanguard REIT Index Admiral (VGSLX)
Fidelity® US Bond Index Premium ( FSITX ) .050% .060% Vanguard Total Bond Market Index Admiral (VBTLX)
Fidelity® Short-Term Treasury Bd Index Prm ( FSBAX ) .090% .100% Vanguard Short-Term Govt Bd Index Admiral (VSBSX)
Fidelity® Intermediate Trs Bd Index Prem ( FIBAX ) .090% .100% Vanguard Interm-Tm Govt Bd Index Admiral (VSIGX)
Fidelty® Long-Term Treasury Bd Index Prem ( FLBAX ) .090% .100% Vanguard Long-Term Govt Bd Index Admiral (VLGSX)

Fidelity isn’t Vanguard’s only challenger. T. Rowe Price, Schwab and TIAA-CREF have decided to compete. This is great for investors with employee sponsored retirement plans. Fifteen years ago, if an employee didn’t have Vanguard on a fund selection list, they often had to settle for high cost funds.

Below, I have listed some model index mutual fund portfolios for investors using Vanguard, Fidelity, T. Rowe Price and TIAA-CREF. I created five different portfolios for each fund company. Each portfolio is designed for investors with different tolerances for risk. It’s also possible to build somewhat less expensive index fund portfolios by using exchange traded funds (ETFs) available at Vanguard, Fidelity and Schwab.

Conservative investors, for example, might want more bonds than stocks. My conservative portfolios include 70 percent bonds and 30 percent stocks. Aggressive investors might prefer to take more risk for the possibility of higher returns. They might prefer to invest 100 percent in stocks.

I also included 5-year and 10-year historical returns for each portfolio. I assumed an investor rebalanced their holdings once a year. Vanguard’s 10-year returns are a bit better than the rest. But if other firms continue to drop their costs, the next 10 years could see some much more even battles.

There is something, however, that’s always worth remembering. Vanguard and TIAA-CREF don’t have private or public shareholders. That’s a big deal. Nobody at these firms can profit at your expense. Firms like Fidelity, however, are different. They might tempt you with a lure.

It reminds me of when I worked in a supermarket. We often advertised bananas. We sold them for less than what we paid. Cheaply advertised bananas brought customers to the store. But customers, once they were in the store, didn’t stop at bananas. They filled their carts with higher priced products too.

Investment companies sometimes follow supermarket tactics. They don’t make money selling index funds. But they can bring investors in the door. About six years ago I helped my friend, Patti Smaldone, build a low-cost portfolio of Fidelity index funds. Two years ago, she called Fidelity. She wanted to rebalance her portfolio but she had forgotten how to buy and sell. That was just the kind of break that the Fidelity rep was looking for. “He asked me why I was in those products,” Patti explained. “And he recommended I buy their actively managed funds instead, saying they would do better.”

If you build a portfolio of index funds with a profit-driven firm, stick to your guns. Keep your costs low. Don’t let anyone convince you to buy an actively managed fund. Some do well. That’s true. But nobody knows, in advance, which funds will win.

That’s why it’s better to stick with low-cost index mutual funds or exchange traded funds instead.

Vanguard Portfolios

Fund Name Fund Code Expense Ratio Conservative Cautious Balanced Assertive Aggressive
Vanguard’s U.S. Total Stock Market Index VTSMX 0.16% 15% 25% 30% 40% 50%
Vanguard’s International Stock Market Index VGTSX 0.19% 15% 20% 30% 35% 50%
Vanguard Total Bond Market Index Fund VBMFX 0.16% 70% 55% 40% 25% 0%
Five Year Compound Annual Growth Rate 5.24% 6.72% 7.71% 9.14% 10.87%
Ten Year Compound Annual Growth Rate 5.06% 5.30% 5.21% 5.23% 4.64%

Fidelity Portfolios

Fund Name Fund Code Expense Ratio Conservative Cautious Balanced Assertive Aggressive
Fidelity Total Market Index Fund Investors Class FSTMX 0.10% 15% 25% 30% 40% 50%
Fidelity International Index Fund-Investors Class FSIIX 0.20% 15% 20% 30% 35% 50%
Fidelity Total Bond Index FBIDX 0.20% 70% 55% 40% 25% 0%
Five Year Compound Annual Growth Rate 5.39% 6.91% 7.98% 9.44% 11.26%
Ten Year Compound Annual Growth Rate 4.78% 5.03% 4.93% 4.98% 4.44%

T. Rowe Price Portfolios

Fund Name Fund Code Expense Ratio Conservative Cautious Balanced Assertive Aggressive
Total Equity Market Index POMIX 0.33% 15% 25% 30% 40% 50%
International Equity Index PIEQX 0.49% 15% 20% 30% 35% 50%
U.S. Bond Enhanced Index PBDIX 0.30% 70% 55% 40% 25% 0%
Five Year Compound Annual Growth Rate 5.54% 7.03% 8.06% 9.5% 11.28%
Ten Year Compound Annual Growth Rate 5.09% 5.28% 5.12% 5.10% 4.44%

Schwab Portfolios

Fund Name Fund Code Expense Ratio Conservative Cautious Balanced Assertive Aggressive
Schwab Total Stock Market Index SWTSX 0.09% 15% 25% 30% 40% 50%
Schwab International Index Fund SWISX 0.19% 15% 20% 30% 35% 50%
*Schwab Intermediate Term U.S. Treasury ETF SCHR 0.09% 70% 55% 40% 25% 0%
Five Year Compound Annual Growth Rate 4.86% 6.5% 7.7% 9.29% 11.33%
Ten Year Compound Annual Growth Rate NA NA NA NA 4.53%

TIAA-CREF Portfolios

Fund Name Fund Code Expense Ratio Conservative Cautious Balanced Assertive Aggressive
TIAA-CREF Equity Index Fund TINRX 0.35% 15% 25% 30% 40% 50%
TIAA-CREF International Equity Index TIERX 0.82% 15% 20% 30% 35% 50%
TIAA-CREF Bond Index Fund TBILX 0.46% 70% 55% 40% 25% 0%
Five Year Compound Annual Growth Rate 5.42% 7.05% 8.34% 9.91% 12.04%
Ten Year Compound Annual Growth Rate NA NA NA 4.51%

Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and The Global Expatriate's Guide to Investing: From Millionaire Teacher to Millionaire Expat.