How I Easily Improved My Investment Returns Using Vanguard Admiral Shares

Not long ago I told you all how I'm reorganizing my investments. This post will give a bit more detail on what I'm doing. Specifically, it will tell how I saved some money while investing and thus will improve my investing return.

As I noted previously, I sold several of my older funds and consolidated the amounts into these three funds:

• Vanguard Total Stock Market Index (VTSMX)
• Vanguard Total Bond Market Index (VBMFX)
• Vanguard Total International Stock Index (VGTSX)

But what I didn't say was that I had enough in my various accounts to convert the first two to Vanguard Admiral shares. What are Admiral shares? They are the same shares as those held in a "regular" Vanguard fund (same value, stocks, etc.) except their expense ratios are lower. The catch? You have to have at least $100,000 invested in a fund per account (not total among various accounts) to get the lower-cost options. Here's the difference in the expense ratios:

• Vanguard Total Stock Market Index (VTSMX) -- 0.15% expense ratio
• Vanguard Total Stock Market Index Admiral (VTSAX) -- 0.07% expense ratio

• Vanguard Total Bond Market Index (VBMFX) -- 0.19% expense ratio
• Vanguard Total Bond Market Index Admiral (VBTLX) -- 0.10% expense ratio

FYI, Vanguard Total International Stock Index (VGTSX) has an expense ratio of 0.27% and does not have an Admiral option.

So, for every $100,000 invested in Vanguard Total Stock Market Index Admiral shares, $80 is saved per year versus investing in "regular" Vanguard Total Stock Market Index shares. And for the bond index fund, $90 per year is saved for every $100k invested. I have a few of these funds in various accounts, so I'm currently saving over $250 each year in investing fees using Admiral shares. While it's not a fortune, $250 for doing nothing different (I still get the funds I want) is nothing to sneeze at either. And it's something that will certainly improve my overall investment results since costs have a BIG impact on total investment returns.

Comments

The requirement is only $50,000 if you have a 10 year history in a particular fund. This is a long time to wait once you set one up, but if you're like me and started a Roth IRA when you were 18 (or younger), you will reach this while you are still fairly young. The only problem for me is I've moved my money into a different account since then so I probably don't qualify yet.

[ABCs of Investing]

Wow, those are cheap MERs for index funds. I was going to suggest switching to the ETF versions but there really isn't any point (as you probably already figured out!).

[Jack]

That's really a good information. One can invest in various way, but to make a profit from the investment is unpredictable. So we usually take help of financial advisor to to make our money worth. Even though we cannot say that a financial advisor is right and we won't go through any loss. I personally get confused when it comes to investing money.

You've rally done a smart work. This information will surely help many of us like me to invest in a right direction. Thanks for sharing this.

[Christian Howd]

FMF, what are your thoughts on the Vanguard Inflation Protected Securities Index compared to the Total Bond Market Index? Do they accomplish the same investing goal? Is one to be preferred? I'd be interested in your thoughts!

[FMF]

Christian --

I don't know enough about it to comment. Sorry.

[Kelly]

Do you hold these index funds within a personal stock account, like tradeking, or within some other investment account, such as 401k? I ask because I found a $15 commission to purchase index/mutual funds from TradeKing. Is that fee appropriate? What type of account will I find cheaper commissions (I can make purchases within my employment Fidelity 401k)?

[FMF]

Kelly --

There are no commissions to purchase from Vanguard. Mutual fund fees cover everything.

[TJ]

FYI, Admiral shares dropped to $10k on all the index funds. I love Vanguard.