Vanguard announced today that effective Feb. 1, 2025, it lowered expense ratios across more than 40% of its funds across share classes—meaning reductions to 168 mutual fund and exchange-traded share classes across 87 funds.
The company said in a press release the reductions—averaging 20%—will save Vanguard’s investors more than $350 million in 2025 alone, with the fee cuts marking the largest annual expense ratio reduction in Vanguard’s nearly 50-year history.

“With this change, 98% of our active fixed income funds and 83% of our fixed income ETF funds are now in the lowest cost decile of their Morningstar Category,” the release states. Valley Forge, Pa.-based Vanguard also noted the initiative underscores its dedication to maintaining low costs and delivering maximum value to advisors and their clients.
“Jack Bogle founded Vanguard in 1975 with a simple purpose—to design an investor-owned company that would serve a single constituency, our clients,” said Salim Ramji, Vanguard’s Chief Executive Officer. “At Vanguard, we’re focused on creating value for our investors, not extracting value from them. We’re proud to build on Vanguard’s legacy of lowering the costs of investing—which we have done more than 2,000 times since our founding—by announcing our largest ever set of expense ratio reductions. Lower costs enable investors to keep more of their returns, and those savings compound over time.”
The release said Vanguard’s track record of lower costs is directly correlated to the long-term performance of the firm’s mutual funds and ETFs–84% of Vanguard funds have outperformed their peer group averages over the past decade (citing LSEG Lipper data on the number of Vanguard funds that outperformed their Lipper peer-group averages for periods ended Dec. 31, 2024: For the 10-year period, 265 of 317 Vanguard funds). This latest expense ratio reduction will allow clients to retain an even greater share of their long-term returns.
“Vanguard’s strength as an industry-leading active manager and index pioneer has only grown over the years, in part due to our low costs,” said Greg Davis, Vanguard President and Chief Investment Officer. “When thinking about our actively managed funds, our portfolio managers can take investment risk strategically as they don’t have to overcome the hurdle of high fees to add value.”
According to a video posted by Morningstar on Jan. 29 titled, “Vanguard in 2025: What Investors Need to Know,” Vanguard’s U.S. mutual funds and ETFs brought in $222 billion last year, second only to BlackRock, at approximately $285 billion.
Reinforcing the role of bonds
According to Morningstar, Vanguard Fixed Income Group is the largest manager of bond mutual funds and ETFs.
Vanguard’s actively managed fixed income funds and ETFs have a weighted-average expense ratio of 0.10% versus the industry average of 0.53% for active funds and ETFs from other firms, and Vanguard’s bond index funds have a weighted-average expense ratio of 0.05%, less than half the average of 0.11% from competitors according to Vanguard calculations using Morningstar data for expense ratios weighted by assets as of Nov. 30, 2024.
“Bonds are poised to play a crucial role in investors’ portfolios going forward,” Davis said. “We expect yields to settle at levels higher than those seen over the past 15 years. This will not only provide attractive inflation-adjusted income, but also reinforce the traditional role of bonds as the ballast in investors’ portfolios.”
The expense ratio reductions will lower costs across Vanguard’s U.S. equity, international equity, and money market funds as well. A full list of Vanguard expense ratio reductions can be found here. The changes in expense ratios are effective immediately.
According to a 2024 report from the Investment Company Institute (ICI), “The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2023,” 401(k) plan participants have incurred substantially lower fees for holding mutual funds over the past two decades, providing higher returns and higher balances in retirement. From 2000 to 2023, the average equity mutual fund expense ratio paid by 401(k) investors dropped by more than half, according to the report.
The ICI report found the average equity mutual fund expense ratio paid by 401(k) investors dropped by 60%, and their average bond mutual fund expense ratio by 63%. The long-running decline in average mutual fund expense ratios paid by 401(k) investors primarily reflects a shift toward lower-cost funds, which includes movement to no-load fund share classes.
SEE ALSO:
• 4 DC Trends to Watch for in 2025 with Vanguard’s Jeff Clark
• Vanguard Launches Advice and Wealth Management Division
• Ramji Takes Reins as Vanguard CEO
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.