Improve Your Investing Return with Vanguard Admiral Shares

I've stated before that costs matter if you want to maximize investment returns -- and here's a great way to reduce your investment costs if you have Vanguard funds in your portfolio:

Invest using Vanguard Admiral shares.

Here are the details on Admiral shares:

One important element of our strategy is Admiral Shares—a lower-cost class of shares available for more than 60 of our funds. Their expense ratios are 18% to 50% lower than those of our standard Investor Shares, which adds up to substantial annual savings—especially when you compare the expense ratios of Admiral Shares to those of competing mutual funds. Greater savings means more money invested and working for you in your account—an advantage that can compound over time.

Sounds nice, huh? Who wouldn't want to take advantage of these, right? Well, there are some criteria that you have to meet. Specifically, the following:

• You have $100,000 or more invested in a single Vanguard fund account, or
  
• You've owned at least one Vanguard fund for at least ten years, the fund currently has a balance of $50,000 or more, and you're registered for online account access.

And if you think this isn't worth the effort, consider the following:

• Vanguard Index 500 expense ratio with normal shares: 0.18%

• Vanguard Index 500 expense ratio with Admiral shares: 0.09%

• If you have $50,000 invested for 30 years and earn 9% before expenses on your investment, this difference will mean over $14,000.

Of course the savings is more if you're investing additional money (above the $50k) or for a longer period of time, but you get the point -- saving even a small amount on a big number adds up to some great savings/additional earnings.

Comments

[Bill]

With free trades available from Fidelity for my IRA, I was able to use Vanguard ETF's to get expenses down to almost zero.

Instead of incurring trading expenses to rebalance over time, I will rebalance my 401k for free to achieve the appropriate asset allocation for the combined portfolio.

[Lazy Man and Money]

I had a similar thought to Bills. Vanguard's Total Market Index (VTI: http://finance.yahoo.com/q/pr?s=vti) expense ratio is 0.07%. Buy them in a Zecco account and avoid commissions.

The net is that you get an even better expense ratio and you don't need 100K or 50K & 5 years. Oh and the VTI is more diversified, but if you want S&P 500, you can get that for about the same expense ratio.