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Wednesday, October 06, 2010

Vanguard Lowers Admiral Shares Minimum to $10,000

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 my core portfolios 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. 

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Key Points:
  • Effective today, 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 (VFINX) $3,000 0.18% $18.00
Vanguard 500 Index Admiral (VFIAX) $10,000 0.07% $7.00
SPDR S&P 500 (SPY) none 0.09% $9.00




Vanguard Total Stock Mkt Idx (VTSMX) $3,000 0.18% $18.00
Vanguard Total Stock Mkt Idx Adm (VTSAX) $10,000 0.07% $7.00
Vanguard Total Stock Market ETF (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!

1/1/1999 through 09/30/10
Total return - and - Compound annual return

My "50:50 Conservative Core Portfolio" was up 75.3% or 4.9% compound annual return.
==> $100,000 invested 1/1/99 became $175,279
==> 50:50 means half in equities and half in fixed income
My "80:20 Aggressive Core Portfolio" was up 62.2% or 4.2% compound annual return.
==> $100,000 invested 1/1/99 became $162,159
My "70:30 Explore Portfolio" was up 170.2% or 8.8% compound annual return.
==> $100,000 invested 1/1/99 became $270,186
=================================================
80% in “Core Aggressive” plus 20% in “Explore” was up 88.1% or 5.5% compound annual return.
==> $100,000 invested 1/1/99 became $188,053
95% “Core Conservative” plus 5% “Explore” was up 82.8% or 5.3% compound annual return.
==> $100,000 invested 1/1/99 became $182,831
100% in VTSMX was up 27.5% or 2.1% compound annual return.
==> $100,000 invested 1/1/99 became $127,508
VFINX (S&P500) was up 14.4% or 1.1% compound annual return.
==> $100,000 invested 1/1/99 became $114,372
Vanguard's Money Market Fund was up 41.4% or 3.0% compound annual return.
==> $100,000 invested 1/1/99 became $141,393


In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
2010 YTD the "Explore Portfolio" is up 4.8% YTD
 
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Here is the full announcement from Vanguard:

Kirk Lindstrom's Investment Letter Performance

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