Vanguard ETF and Mutual Fund Expense Ratio Changes (Updated January 2017)

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Updated. Vanguard recently re-calculated the expense ratios for ETF and mutual fund shares classes with an September 2016 fiscal year-end. The effective change dates were 1/26 or 1/27/2017. Here are some notable changes:

  • Vanguard Wellesley Income Fund (Admiral shares) was decreased to 0.15%. Investor shares 0.22%.
  • Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) is now 0.07%.
  • Vanguard Target Retirement 2010 and Income Fund was cut to 0.13%. Vanguard Target Retirement 2025 Fund 0.14%.

To see the full list of changes, here is the 1/27/17 announcement for advisors and Vanguard also started a new investor-focused expense ratio page.

Background. When you invest in a mutual fund or ETF, the fund company charges you a fee for managing that basket of stocks or bonds. This is called the annual net expense ratio, usually expressed as a percentage. 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 day 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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You don’t need to track every little change as an investor, but I subscribe to updates of their expense ratio change announcements anyway. Vanguard runs their funds “at cost”, so sometimes as their costs go up, the expense ratios can also rise a bit. I’ll try to keep this list updated, along with some brief highlights.

2015/2016 Announcement Links

  • January 2017. Lower expense ratios for 21 mutual fund share classes, including one ETF, three quantitative equity funds, and six target-date funds.
  • December 2016. Lower expense ratios for 35 Vanguard fund share classes, including 11 ETF Shares.
  • April 2016. Lower expense ratios for 88 mutual fund and ETF shares.
  • February 2016. Lower expense ratios for 42 mutual fund and ETF shares.
  • January 2016. Lower expense ratios for 35 mutual fund and ETF shares.
  • December 2015. Lower expense ratios for 53 mutual fund shares, including 21 ETFs.
  • May 2015. REIT Index fund expense ratios went up. VNQ went up to 0.12%.
  • April 2015. Total Bond Market ETF (BND) and Total Bond Market Index Admiral Shares (VBTLX) dropped to 0.07%.
  • March 2015. Only one change: Lower expense ratio for Vanguard Convertible Securities Fund.
  • February 2015. Lower expense ratios for 6 international ETFs.
  • January 2015. Expense ratio changes for several actively managed funds.

Past Highlights

  • December 2016. Short, Intermediate, and Long-Term Corporate and Government Bond Index ETFs lowered expense ratios from 0.10% to 0.07%.
  • April 2016. Total US Stock, 500 Index, Total US Bond, and Small-Cap Value all lowered expense ratios in one or more share classes.
  • February 2016. Total International Stock, Total International Bond, FTSE All-World ex-US, and Global ex-US REIT funds all lowered their expense ratios.
  • January 2016. Target Retirement 2010-2060 Funds saw their expense ratio drop by 2-3 basis points to 0.14%-0.16%.
  • February 2014. Total US Stock ETF (VTI) was unchanged at 0.05%. Total International Stock ETF (VXUS) dropped to 0.14%. FTSE Emerging Markets ETF (VWO) dropped to 0.15%.
  • January 2013. Target Retirement 2010-2055 Funds saw their expense ratio drop by a basis point to 0.16%-0.18%.
  • May 2012. Vanguard REIT Index Fund, and Vanguard’s Short / Intermediate / Long-Term Investment-Grade Funds, Vanguard’s Short / Intermediate / Long-Term Treasury Funds, and a few other bond funds had expense ratio drops.
  • April 2012. Vanguard Inflation-Protected Securities Fund, Total Bond Market Index Fund, 500 Index Fund, Balanced Index Fund, Extended Market Index Fund, Small-Cap Value Index Fund, Total Stock Market Index Fund, and Value Index Fund had share classes with expense ratio drops.
  • February 2012. Vanguard Emerging Markets Stock Index, FTSE All-World ex-US Index, Total International Stock Index, and Total World Stock Index funds amongst others had share classes with expense ratio drops.

(Note that Vanguard chooses to delete their old announcements after about a year, so everything 2014 and before is now gone.)

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). I think the competition is great and even Vanguard needs to be kept on its toes. However, with my own money, I think Vanguard has both the past history and better ongoing structure to keep costs low over the long haul. I have used both Fidelity Spartan funds and iShares ETFs as alternatives.

Comments

  1. I wonder if the recent decline could force an increase in expense ratios.

  2. Are you buying ETFs directly or through a robo-advisor?

    The robo-advisor approach typically charges a flat percentage, but there are no transaction fees for buying and selling. Still pay the fund fees of course.

    I am in the process of migrating from actively managed funds to ETFs.

  3. BlackRock and Schwab have the lowest fees for the stock market index ETFs. It is just 0.03%. Hopefully Vanguard will follow and lower their VTI fee from 0.05% to 0.03%. I know it doesn’t sound like a lot. But running the numbers show that it will make $11000 difference for me if I retire after 30 years of professional career. And running the numbers for 60 years show an astounding difference of $168,000. That’s not small change.

    • Could not agree with you more, Nick. More people should look at expense ratios of funds they hold.

    • Many funds have temp lowered there fees to compete with Vanguard only to raise them later on. Vanguard is the only true non profit

  4. From what I can fathom, any expense ratio below 0.10% really is not going to make a big difference unless your balance is massive…and if it is, who cares if you pay a few hundredths of a percentage fee more? I know I wouldn’t much care if I paid an annual expense ratio of $3k or $5k on a $10 million portfolio. Let the kids cry over their meager inheritance 🙁

    And for someone with a $100k portfolio, paying .03% or .05% is a difference of $20/year. That’s less than the cost of a pizza. Yes, I know…that may be several pizzas over my remaining investment time horizon.

  5. Not reported are the expense ratio increases: VGSIX — Investor shares REIT Index went up .26

  6. Minnesota Saver says:

    Four years ago I consolidated all my employer 401(K)s from having been laid off mutiple times working in high tech into Vanguard ETFs. Reductions in the ETF expense ratios help reinforce this was the right move for me. Not only is it simpler to manage one account, it is proving to be more cost effective.

    Nice boring progress.

  7. That’s actually so good for the everyday consumer. Or mum and dad investors as we call them here. No need for silly fees that eat up your capital. Well done to Vanguard for cutting their fees and allowing people to create more wealth in the long run.

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