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Throughout my career, I’ve always worried about coming across as too much of a cheerleader for Vanguard Group. Still, it’s hard to argue that this morning’s press release is anything but good news: Vanguard announced fee reductions affecting 168 share classes across 87 funds. I imagine most HumbleDollar readers stand to benefit.
A few examples:
I like the fee reductions but I wish they’d hire someone to do a complete revamp of their online tech, figure out if they really want to be a brokerage or are they just a mutual fund family with ETFs?
Good news for sure.
Although my primary holding, VTI didn’t get an ER reduction, it is already at .03.
VXUS, my other holding, got a .03 reduction from .08 to .05. I will take it and say, Thank You Vanguard!
My money market fund, VXFXX didn’t get an ER reduction either, remaining at .11, and although VUSXX has a lower ER at .07, VMFXX out performed it’s lesser ER fund
These days my Vanguard Holdings are concentrated in two ETFs…VTI and VXUS. VTI was not one of the funds effected, but it already has a ER or .03
I appreciate the .03 ER reduction on my XVUS however. Thank you Vanguard.
My Money Market Fund VMFXX was unchanged. It has a higher ER than VUSXX but still outperformed it.
The good news just keeps a coming!
I’m a big Vanguard fan and am happy about this announcement. However, I have a question on it. Since Vanguard returns profits to its funds, does this really have the full $350 million of annual impact as noted by Vanguard of dollars flowing to fund-holders? It would seem to reduce income going to Vanguard upfront to spend on salaries and technology (!) for example, but weren’t some of these dollars coming back to us anyway?
I would never argue that higher expenses for index ETFs are better than lower expenses. And, any lowering of expenses for investors is wonderful. That being said, a .01% reduction in an expense ratio is de minimis. On a million, it is $500. For someone investing $1000, it is fifty cents. Vanguard already had better expense ratios in comparison to most other fund families but it is only when compared to active management that the difference is really motivating.
The real importance of this kind of move is that it continues the pressure on other fund families to reduce expenses, and it provided Vanguard an opportunity to demonstrate their commitment to the idea.