Welcome @Nathaniel_John!
Well, I’m quite sure your friend is mistaken about the 0.12% expense ratio not including the fees of the underlying funds. For example, from Fidelity’s page on FIPFX, one of their target date index funds:
This ratio also includes Acquired Fund Fees and Expenses, which are expenses indirectly incurred by a fund through its ownership of shares in other investment companies.
So the “net expense ratio” definitely is the “all in cost” for that fund (not counting any transactional costs, like trading fees which should also be zero if you live in the US). If that wasn’t true, every mutual fund in the world would wrap itself in an ultra low fee container fund, and advertise themself as super low fee, but the SEC don’t put up with that shit.
I do think that target date index funds are often confused with target date funds (note the missing word index). Target date funds are confusingly also named after a year, but have higher expense and can have all sorts of crazy nonsense going on inside of them. Fidelity offers both kinds, which can lead some new investors astray.
At any rate, I think your friend is trying to steer you right, by pointing you towards low fee index funds and ETFs. Those are every bit as good as a target date index fund (even marginally lower expenses in most cases). They’re just a bit more complicated to manage because you might end up buying a few funds, and rebalancing them yourself rather than just one set-it-and-forget-it option.
If you prefer to go down that route, check out a three fund portfolio made up up of only simple index funds or ETFs with very low expense ratios. If that’s the way you decide to go, that would be outstanding and you definitely would have my full support!
