October 6, 2010

Mutual Fund Price Wars

To keep up with competitors, Vanguard announced that its Total Stock Market Index Fund, symbol VTSAX has lowered its minimum from 100k to 10k.  This is wonderful news for investors.  Its no secret that I love low fees and because of that, I love the Vanguard series of funds and etf's.
VTI is the Total Stock Market ETF whose fees are .07%.  Now, most investors can buy into the mutual fund version of the same, VTSAX whose fees are likewise .07%.

Check out what low fees mean to you in the long term.  You can access this from the yahoo finance profile of VTSAX here.  Scroll down and look for fees and expenses.  Below is what you will see.  A comparison between VTSAX and the average fund in the category. 

Fees & Expenses

Expense                                VTSAX                        Category Avg
Total Expense Ratio:               0.07%                              1.11%
Max 12b1 Fee:                        N/A                                 N/A
Max Front End Sales Load:      N/A                                5.27%
Max Deferred Sales Load:        N/A                                2.50%
3 Yr Expense Projection*:         $23                                $700
5 Yr Expense Projection*:         $40                                $1,114
10 Yr Expense Projection*:       $90                               $2,224
* Per $10,000 invested

So the question to you is, would you rather pay $90 or $2,224 (for every 10k invested) ?????
And to add insult to injury, most stockbrokers and financial advisors will charge you another 1%-2% on top of that.

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