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 Post subject: Is V.'s index fund fee that big of a deal?
PostPosted: Thu Apr 26, 2007 9:34 am 

Joined: Thu Apr 19, 2007 7:58 am
Posts: 231
I'm thinking of opening an index fund (probably total stock market) at Vanguard. I can only start the fund with 3k and it'll take several years until I reach 10k which is the point where the $10 annual fee is no longer assessed. The expense ratio is very low at .19, does the $10 make that big of a difference?


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PostPosted: Thu Apr 26, 2007 10:08 am 
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Location: New Jersey
I don’t think it is unreasonable if that’s what your asking. What are your alternatives? If you plan on making regular contributions (weekly or monthly), $10 is a small price to pay to avoid transaction costs. And, as you point out, it’s only until your balance reaches $10,000.


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PostPosted: Thu Apr 26, 2007 10:31 am 

Joined: Sat Apr 07, 2007 2:03 am
Posts: 872
Location: Taishan, Guangdong, China
Let's look at it in terms of overall expense ratio.

Year 1: $10/$3000 = 0.33% + 0.20% = 0.53%
Year 2: $10/$6000 = 0.17% + 0.20% = 0.37%
Year 3: $10/$9000 = 0.11% + 0.20% = 0.31%
Year 4: over $10K = 0.20%

Obviously, 0.53% is higher than 0.20% but the question is who ELSE can you go to w/ super low fees and no minimums. I myself did a lot of looking in the past for index funds with low minimums and only company I can think of is T. Rowe Price. They have about 5 different index funds -- expense ratios look to be about 0.35%. Which means after the 3rd year, Vanguard funds will be charging less.


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PostPosted: Thu Apr 26, 2007 10:49 am 

Joined: Thu Apr 19, 2007 7:58 am
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MossySF wrote:
Let's look at it in terms of overall expense ratio.

Year 1: $10/$3000 = 0.33% + 0.20% = 0.53%
Year 2: $10/$6000 = 0.17% + 0.20% = 0.37%
Year 3: $10/$9000 = 0.11% + 0.20% = 0.31%
Year 4: over $10K = 0.20%

Obviously, 0.53% is higher than 0.20% but the question is who ELSE can you go to w/ super low fees and no minimums. I myself did a lot of looking in the past for index funds with low minimums and only company I can think of is T. Rowe Price. They have about 5 different index funds -- expense ratios look to be about 0.35%. Which means after the 3rd year, Vanguard funds will be charging less.


Did you find the T. Rowe site to be hard to navigate. That's why I went looking at V. in the first place, I couldn't find what I was looking for at T. Rowe.


My alt. is T Rowe and like Mossy SF points out, V beats them by overall expense ratio after a few years. The advantage to T. Rowe is the $50 asset builder. V. has $100 minimum addt'l investment. I think it's reasonable too. I just like to check and see if there are things that I am missing in my research.

Thanks


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PostPosted: Thu Apr 26, 2007 10:52 am 

Joined: Sat Apr 07, 2007 2:03 am
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Location: Taishan, Guangdong, China
News update:

https://flagship.vanguard.com/VGApp/hnw/VanguardViewsArticlePublic?ArticleJSP=/freshness/News_and_Views/news_ALL_project_Q_04262007_ALL.jsp

You can now avoid the fee by simply picking electronic delivery.


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PostPosted: Thu Apr 26, 2007 10:55 am 

Joined: Thu Apr 19, 2007 7:58 am
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MossySF wrote:
News update:

https://flagship.vanguard.com/VGApp/hnw/VanguardViewsArticlePublic?ArticleJSP=/freshness/News_and_Views/news_ALL_project_Q_04262007_ALL.jsp

You can now avoid the fee by simply picking electronic delivery.


Great news! Thanks.


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PostPosted: Thu Apr 26, 2007 11:52 pm 
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Joined: Sun Apr 15, 2007 1:45 pm
Posts: 84
Location: New Jersey
The fee elimination is nice indeed. I'd decided against opening an account at Vanguard, but now I think I'll go for it. Seems like it'll be better than stashing cash in a savings account -- higher yield, no need ever again to switch to some other bank in search of a good return, etc.


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PostPosted: Fri Apr 27, 2007 1:05 am 

Joined: Sat Apr 07, 2007 2:03 am
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Location: Taishan, Guangdong, China
I was seriously thinking about opening a Fidelity account in order to build a 12 x 90-day T-bill ladder. Except when I finally calculated the possible return, it came out to about extra $40 a year over what I'm getting in Vanguard Treasury MMF. Losing some liquidity didn't seem worth the effort.


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PostPosted: Fri Apr 27, 2007 6:11 am 

Joined: Thu Apr 19, 2007 7:58 am
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MossySF wrote:
I was seriously thinking about opening a Fidelity account in order to build a 12 x 90-day T-bill ladder. Except when I finally calculated the possible return, it came out to about extra $40 a year over what I'm getting in Vanguard Treasury MMF. Losing some liquidity didn't seem worth the effort.


I'm a ;ittle confused over both of the most recent comments.
Mossy: V's treas MMF has a 4.94% c. yield but a .29% expense ratio. So you're getting 4.65 yield right? You can get this at ING and other OL banks too. What made you choose the MMF?

Jer: are you talking about putting your EF in an index fund? Or just extra cash (what a great position to be in!)


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PostPosted: Fri Apr 27, 2007 10:02 am 

Joined: Fri Apr 27, 2007 9:39 am
Posts: 39
Location: US
Eliminating the fees sealed the deal for me. I have 1.5k in an employee stock purchase plan from a previous employer that I am going to liquidate as soon as I have enough cash to add to the pot to open an account.

I (eventually) want this taxable account that I can use for about a third of my emergency fund.


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PostPosted: Fri Apr 27, 2007 10:22 am 

Joined: Sat Apr 07, 2007 2:03 am
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Location: Taishan, Guangdong, China
sandycheeks wrote:
I'm a ;ittle confused over both of the most recent comments.
Mossy: V's treas MMF has a 4.94% c. yield but a .29% expense ratio. So you're getting 4.65 yield right? You can get this at ING and other OL banks too. What made you choose the MMF?


Fund yield number already includes the expenses so 4.94% is what you get. Add in no-state tax - since I'm in the CA 9.3% bracket, that bumps the tax equivalent compound yield to 5.64%. You can use this calculator to determine what taxable/tax-free option gives you the biggest bang:

http://thefinancebuff.com/2007/04/which-vanguard-money-market-fund.html

jer was talking about this thread he started earlier:

http://www.getrichslowly.org/forum/viewtopic.php?t=164

Trying to link an online savings account to treasury direct in order to build a T-Bill ladder for higher returns. Hence my reply about me sticking 100% with Treasury MMF.


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PostPosted: Fri Apr 27, 2007 2:05 pm 
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sandycheeks wrote:
Jer: are you talking about putting your EF in an index fund? Or just extra cash (what a great position to be in!)


Right now I have my cash in a high-yield savings account; I was annoyed when they eliminated third-party ACH transactions, and TreasuryDirect was one of the reasons. But at Vanguard I can get a higher yield, and without the fees it's enough to make doing Treasury stuff myself pointless, and overall it seems like a great idea now.

Not the emergency fund, though, I have that in a physical bank where I can get at it at a branch or ATM.


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PostPosted: Sat Apr 28, 2007 7:34 am 

Joined: Mon Apr 16, 2007 2:23 am
Posts: 8
Location: Beyond The Sun.
I am confused by this

Quote:
The fee does not apply to the following accounts:

* Money market sweep accounts held through Vanguard Brokerage Services®.
* Accounts held in employer-sponsored retirement plans.
* Accounts held in 529 plans.
* Accounts held through financial intermediaries.


Does that mean if I am making payroll deductions into a 403b there is no fee at Vanguard now?


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PostPosted: Sat Apr 28, 2007 9:10 am 

Joined: Sat Apr 07, 2007 2:03 am
Posts: 872
Location: Taishan, Guangdong, China
Ziptar wrote:
I am confused by this

Quote:
The fee does not apply to the following accounts:

* Money market sweep accounts held through Vanguard Brokerage Services®.
* Accounts held in employer-sponsored retirement plans.
* Accounts held in 529 plans.
* Accounts held through financial intermediaries.


Does that mean if I am making payroll deductions into a 403b there is no fee at Vanguard now?


It means the $20 per fund fee doesn't apply whether you meet the requirements for waiving or not -- but the separate fee schedule for the above accounts do apply.


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PostPosted: Sat Apr 28, 2007 10:53 am 
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Joined: Fri Mar 30, 2007 5:39 pm
Posts: 283
MossySF wrote:
Ziptar wrote:
I am confused by this

Quote:
The fee does not apply to the following accounts:

* Money market sweep accounts held through Vanguard Brokerage Services®.
* Accounts held in employer-sponsored retirement plans.
* Accounts held in 529 plans.
* Accounts held through financial intermediaries.


Does that mean if I am making payroll deductions into a 403b there is no fee at Vanguard now?


It means the $20 per fund fee doesn't apply whether you meet the requirements for waiving or not -- but the separate fee schedule for the above accounts do apply.


To be more specific, no, I don't think it lets you out of the fee. You 403(b) is an employer-sponsored plan, so it's likely excluded from the fee waiver. I'm in a similar boat with a $15 annual 403(b). I think the only way out is to achieve Voyager status, which is $250k in total Vanguard assets.

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