vglogoUpdated March 2019. Vanguard recently announced a few updated expense ratios on some popular ETFs. Here are a few highlights:

  • Vanguard Total International Bond ETF (BNDX) is now 0.09%.
  • Vanguard FTSE All-World ex-US ETF (VEU) is now 0.09%.
  • Vanguard Tax-Exempt Bond ETF (VTEB) is now 0.08%.
  • Vanguard FTSE Emerging Markets ETF (VWO) is now 0.12%.
  • Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) is now 0.12%.
  • Vanguard High Dividend Yield ETF (VYM) is now 0.06%.
  • Vanguard Total World Stock ETF (VT) is ow 0.09%.

In addition, the following mutual funds will now have lower-cost Admiral Shares:

  • Vanguard FTSE Social Index Fund (VFTAX)
  • Vanguard FTSE All-World ex-US Small-Cap Index Fund (VFSAX)
  • Vanguard High Dividend Yield Index Fund (VHYAX)
  • Vanguard Long-Term Bond Index Fund (VBLAX)
  • Vanguard Total World Stock Index Fund (VTWAX)

Vanguard Select ETFs. These 13 ETFs are what Vanguard thinks should be the building blocks of your portfolio. Here are expense ratios on the four broadest ones + their classic S&P 500 ETF:

  • Vanguard Total US Stock Market (VTI) at 0.04%.
  • Vanguard Total International Stock Market (VXUS) at 0.09%.
  • Vanguard Total US Bond Market (BND) at 0.04%.
  • Vanguard Total International Bond (BNDX) at 0.09%.
  • Vanguard 500 Index (VOO) at 0.04%.

Background. When you invest in a mutual fund or ETF, the fund company charges you a fee called the annual net expense ratio. If you hold a steady $10,000 in a hypothetical fund with a 1% expense ratio, that would result in an annual charge of $100. These expenses are actually deducted daily in tiny increments from the funds’ net asset value (NAV), and while the numbers can seem small they will compound quietly and relentlessly over time. Here is an illustration from the Vanguard website:

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Vanguard has a long history of lowering their expense ratios as their assets under management grow, whereas the industry average hasn’t changed very much.

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Past announcements. Vanguard deletes their old announcements after 12 months. I started using ticker symbols for brevity.

  • April 2017. VTI, VOO, BND all down to 0.04%.
  • March 2017. VWENX down to 0.16%.
  • January 2017. VWIAX down to 0.15%. VTIP down to 0.07%. VTINX down to 0.13%.
  • December 2016.
  • April 2016. VTI, VOO, BND, VBR, all down.
  • February 2016. VTI, BNDX, VEU, VNQI all down.
  • January 2016. Target Retirement 2010-2060 Funds down to 0.14%-0.16%.
  • May 2015. VNQ up to 0.12%.
  • April 2015. BND down to 0.07%.
  • February 2014. VXUS down to 0.14%. VWO down to 0.15%.
  • January 2013. Target Retirement 2010-2055 Funds down to 0.16%-0.18%.

The Vanguard Effect. In recent years as index funds have shot up in popularity, most of the major providers have introduced similar low-cost products (notably iShares, Fidelity, and Schwab). Every subsequent “price drop” is less newsworthy or impactful to my portfolio. However, I think competition is great and even Vanguard needs to be kept on its toes. I have bought ETFs from other providers when they are the best available option.

However, you can’t ignore the fact that Vanguard has been the leader in the industry. The super-low-cost ETFs only exist where Vanguard has already established itself. If Vanguard hasn’t pushed the cost down in a specific area, their competitors know that and keep the costs high. Here’s a chart showing the “Vanguard Effect“.

As of July 2018, Vanguard brokerage accounts allow commission-free trading of Vanguard ETFs as well as all major competitor ETFs, for example from Blackrock iShares and Schwab. Fidelity and Schwab have been expanding their line-up of commission-free ETFs, but none of them include Vanguard ETFs in their lists.

“The editorial content here is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author’s alone.”

Vanguard ETF & Mutual Fund Expense Ratio Changes (March 2019) from My Money Blog.


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