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Kirk Lindstrom has an engineering degree from the University of California, Berkeley. Following 20 years of research and development as a scientist and engineer at Hewlett Packard, Kirk turned his attention to investments where he edits "Kirk Lindstrom's Investment Letter," that... More
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  • Vanguard Lowers Fund Fees 0 comments
    Oct 8, 2010 11:25 AM | about stocks: VTI, SPY, VTI
    Vanguard Lowered Admiral Shares Minimum to $10,000 for Index Funds and $50,000 for Managed Funds.

    This is great news for Vanguard investors, especially those who follow the core portfolios I recommend in my newsletter that are made of Vanguard index funds.  Vanguard says:
    "If any of your current Vanguard fund holdings qualify, we'll notify you by mail and provide additional details about what this change means for you. Then, over the next few weeks, we'll complete the change for you automatically."
    I called Vanguard and immediately converted my accounts that were under $100,000 and qualified to the lower cost funds.  The gentleman I spoke to was not aware of the change and thanked me for alerting him.   They said they plan to convert accounts automatically but you can call or do it yourself online.

    Key Points:
    • Effective October 6, Vanguard has reduced the minimum amount required to qualify for Admiral™ Shares to $10,000 for most of our broad-market index funds and $50,000 for actively managed funds, down from the previous $100,000 minimum. Admiral Shares cost significantly less than traditional fund shares, and their expense ratios are among the lowest in the mutual fund marketplace.
    • Thanks to their low costs, Admiral Shares can reduce your expenses 18%–50% below the already low expense ratios of our standard Investor Shares. For example, if you invest $50,000 in a fund's Admiral Shares with a 0.07% expense ratio instead of its Investor Shares with a 0.18% expense ratio, you could keep approximately $1,200 more in net returns for your account over a 10-year period, assuming an average annual return of 8%.
    Switching to Admiral Shares is easy:
    • When you're promoted to Admiral Shares, you'll remain invested in the same Vanguard fund(s). Admiral Shares are just lower-expense shares of existing funds.
    • All cost-basis information from your Investor Shares will be transferred to your Admiral Shares automatically.
    • Changes from Investor Shares to Admiral Shares of the same fund are tax-free.
    • Any check writing privileges you had with your Investor Shares account will transfer to your Admiral Shares account. You'll receive a new checkbook for your Admiral Shares account.
    Vanguard Fund Comparison
    Name and (Ticker Symbol) Min Initial Investment Total Expense Ratio Annual Cost per $10,000
    Vanguard 500 Index Investor (MUTF:VFINX) $3,000 0.18% $18.00
    Vanguard 500 Index Admiral (MUTF:VFIAX) $10,000 0.07% $7.00
    SPDR S&P 500 (NYSEARCA:SPY) none 0.09% $9.00
    Vanguard Total Stock Mkt Idx (MUTF:VTSMX) $3,000 0.18% $18.00
    Vanguard Total Stock Mkt Idx Adm (MUTF:VTSAX) $10,000 0.07% $7.00
    Vanguard Total Stock Market ETF (NYSEARCA:VTI) none 0.07% $7.00
    My core portfolios are made of Vanguard index funds and a CD. This great news means all funds become Admiral shares where they get the lower expense ratios to keep even more money in my portfolios!

    Here is the full announcement from Vanguard:

    Disclosure: Long vtsmx, vtsax,vfinx, vfiax, spy

    Disclosure: Long vtsmx, vtsax,vfinx, vfiax, spy
    Themes: Vanguard Funds Stocks: VTI, SPY, VTI
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