Vanguard reported lower expense ratios today for 15 mutual fund shares last week, including the industry’s largest balanced fund. As a result, it noted, investors in these funds saved an estimated $23 million.
It’s the fourth of six planned announcements, according to the investment giant, and claims that to date, Vanguard has reported an estimated $165 million in cumulative savings across 139 index and actively managed fund and ETF shares.
“We’re pleased to continue lowering the cost of investing for our clients, as low costs are absolutely critical to long-term investment success,” Vanguard CEO Bill McNabb said in a statement. “Low fees are the starting point – the first filter in selecting investments. However, we remind investors there are other considerations in selecting a fund and an investment provider as well as other factors that strongly influence outcomes.”
Investor outcomes are particularly sensitive to savings rates, especially over the long term.
For example, it explained in a bit of quick math that increasing one’s savings rate by 1 percent has a far more profound impact than paying 1 basis point less in fees. Over 30 years, a 1 percent higher savings rate results in $65,000 in additional assets, compared to the $700 savings stemming from a 1 basis point difference in expense ratios (assuming an investor has a starting salary of $100,000, an investment growth rate of 5 percent, and a salary increase of 1 percent annually).
Active Tax-Exempt Funds Lead Reductions
- Seven actively managed state municipal bond funds are reporting lower expenses for an estimated cumulative savings of more than $7 million. They are:
- Vanguard California Intermediate-Term Tax-Exempt Fund Investor (VCAIX) and Admiral (VCADX) shares declined one and three basis points to 0.19 percent and 0.09 percent, respectively.
- Vanguard California Long-Term Tax-Exempt Fund Investor (VCITX) and Admiral (VCLAX) shares declined one and three basis points to 0.19 percent and 0.09 percent, respectively.
- Vanguard Massachusetts Tax-Exempt Fund (VMATX) declined one basis point to 0.15 percent.
- Vanguard New Jersey Long-Term Tax-Exempt Fund Investor (VNJTX) and Admiral (VNJUX) shares declined one and three basis points to 0.19 percent and 0.09 percent, respectively.
- Vanguard New York Long-Term Tax-Exempt Fund Investor (VNYTX) and Admiral (VNYUX) shares declined one and three basis points to 0.19 percent and 0.09 percent, respectively.
- Vanguard Ohio Long-Term Tax-Exempt Fund (VOHIX) declined one basis point to 0.15 percent.
- Vanguard Pennsylvania Long-Term Tax-Exempt Fund Investor (VPAIX) and Admiral (VPALX) shares declined one and three basis points to 0.19 percent and 0.09 percent, respectively.
Active Balanced Funds Announce Reductions
Three actively-managed fund shares also reported expense ratio decreases this month. The $98 billion Vanguard Wellington Fund Investor (VWELX) and Admiral (VWENX) shares declined one and two basis points to 0.25 percent and 0.16 percent, respectively. The expense ratio of the $1.5 billion Vanguard Convertible Securities Fund (VCVSX) declined four basis points to 0.3
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
