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Vanguard Lowers Fees on Mutual Funds

Posted By Jim On 10/06/2010 @ 2:01 pm In NEWS | 23 Comments

Vanguard has always been known for their low mutual fund fees [3], one of the reasons why so many experts celebrate their services. However, in order to get the lowest prices possible, you had to invest over $100,000 into a single mutual fund in order to get Admiral Shares. Today, they announced that the minimum required to purchase Admiral Shares would drop from $100,000 to $10,000 for index funds and to $50,000 for active funds.

Here are a few stats:

  • 17 index funds and 35 active funds were affected.
  • Nearly 2 million clients will save on expense ratio decrease by qualifying for Admiral shares.
  • Range of admiral shares expense ratios – 0.07% for Total Stock & S&P 500 to Capital Opportunity (0.41%).

ETFs Lead The Way

When they announced that you could buy Vanguard ETFs for free [4] within a Vanguard brokerage account, I knew it was only a matter of time before the mutual funds would see their prices fall. The Vanguard 500 Index Investor fund (VFINX [5]) has an expense ratio of 0.18% compared to the Vanguard S&P 500 ETF (VOO [6]) with an expense ratio of 0.06%. Since both are “free” with a Vanguard account, there’s no reason why you wouldn’t go with the ETF.

Now take a look at the Admiral Shares version of the Vanguard 500 Index Fund (VFIAX) with it’s 0.07% expense ratio and it’s (former) minimum investment of $100,000… no reason you shouldn’t go with the ETF at this point. With the drop to $10,000, I think it’s enough for some investors to leave things alone since a 0.01% fee difference isn’t going to overcome any tax considerations (why sell shares and pay taxes when you have no need to?).

What do you think? Does this make Vanguard more appealing? Less appealing? Don’t really care?


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/vanguard-lowers-fees-mutual-funds.html

[3] low mutual fund fees: http://www.bargaineering.com/articles/low-minimum-initial-investment-mutual-funds.html

[4] buy Vanguard ETFs for free: http://www.bargaineering.com/articles/vanguard-reduces-trading-etf-transaction-fees.html

[5] VFINX: http://www.google.com/finance?q=vfinx

[6] VOO: http://www.google.com/finance?q=VOO

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