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!).