In early February, investment services firm The Vanguard Group announced its largest fee cut ever, slashing costs on 168 share classes across 87 funds. The move went into effect on February 1 and is expected to save investors more than $350 million in 2025, according to Vanguard.
"This fee cut speaks to what our founder, Jack Bogle, set out to do, which was to create an investment company that was designed for one constituency, and that's our investors," said Vanguard CEO Salim Ramji in a statement. "Bogle had a great phrase: 'You get what you don't pay for.'"
Ramji added that "there's a false dichotomy between, Do you want great performance or high quality, or do you want low costs? At Vanguard, you can get both."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Following the fee reduction, Vanguard proudly noted that 86% of its mutual fund and exchange-traded fund (ETF) assets have the lowest-cost declines in their peer groups. The average expense ratio for Vanguard's index fixed-income ETFs is now just 0.037% and its actively managed fixed-income ETFs have an average expense ratio of 0.105%.
How Vanguard's lower fees benefit investors
As Kiplinger contributor and Head of Investment & Trading Services at Vanguard, James Martielli, CFA, explains in his piece "A Frugal Saver's Guide to Spotting Investment Costs," expenses are often one of "the best predictors of future returns of funds with a similar investment strategy."
Specifically, he says that "the higher the average expense ratio, the lower the average return." Let's say you have $1,000 to invest in a fund that charges an expense ratio of 0.20% or another that charges 0.05% to invest. Your return from the fund that costs 0.05% will accrue a bigger return over time than the one that charges 0.20% because you're left with more money to invest.
"Like interest, costs compound and can really add up over time," Martielli writes.
If you're in the market for a low-cost fund or just want to know what your options are, here are the Kiplinger ETF 20, our favorite cheap ETFs to buy. We also have the Kiplinger 25, the best no-load mutual funds, several of which are top Vanguard funds.
Related Content
-
The 'Vinyl Rule' of Retirement: Plan for Two Sides in Your Next ActBecause “Life is what happens when you’re busy making other plans.”
-
Five Destinations for Active and Chill Travelers AlikeWhether you reach for a paddleboard or a lounge chair, find your groove in a location that offers something for both kinds of travelers.
-
I'm a Financial Planner: Here Are Five Phases of Retirement Planning You Have to Get RightA solid retirement plan is a must, but you can't go halfway. Neglecting just one area of your plan could cause the whole thing to collapse.
-
An IRS Enrolled Agent's Top 10 Reasons to Stop Doing Your Own TaxesTaxes can get complicated quickly, and the more money you have, the tougher they tend to be. So, if you have any of these 10 tax situations, don't risk it.
-
Stocks Slip as Job Growth Stalls: Stock Market TodayThe August jobs report came in much weaker than expected, while the unemployment rate ticked higher.
-
Dismal August Jobs Report Offers Rate-Cut Relief: What the Experts Are SayingThe August jobs report came in much lower than expected, lifting the odds that several rate cuts will come through by year's end.
-
Greed, Fear and Market Volatility: A Financial Adviser's Guide to Keeping Emotions Out of Investment DecisionsDon't panic! And don't be so confident in the stock market that you overlook risk. Instead, be logical. Your retirement security could depend on it.
-
Want a Financial Adviser Who Shares Your Faith? Look for One With a CKA DesignationFinancial professionals with a Certified Kingdom Advisor certification are committed to integrating biblical principles with sound financial advice.
-
S&P 500 Hits New High on Jobs Friday Eve: Stock Market TodayThe S&P 500 hit a new all-time closing high and most of the stocks in the Dow Jones Industrial Average were up the day before a critical jobs report.
-
SPACs, SMRs and How to Invest in the Nuclear InsurgencyBig nuclear deployments are in process, but small modular reactors could be a better way to meet rapidly rising electric power demand.
