When does Vanguard take their cut?

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James Bond Index
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When does Vanguard take their cut?

Post by James Bond Index » Mon May 11, 2015 9:50 am

I've had an account with Vanguard since 1997. Maybe I have overlooked it, but I don't recall seeing on any statements or transaction summaries when the expense ratio is deducted from my account.
Say you have a total stock market index (VTSAX) with an expense ratio of 0.05%. When does Vanguard take their 0.05%? Is it when you purchase the fund? When dividends are paid? When you sell?
Just curious---Thanks

livesoft
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Re: When does Vanguard take their cut?

Post by livesoft » Mon May 11, 2015 9:52 am

It's death by a thousand cuts. They take a pro-rated share of their cut every single day (roughly).
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miles monroe
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Re: When does Vanguard take their cut?

Post by miles monroe » Mon May 11, 2015 9:54 am

they accrue expenses every day which is reflected as a reduction in the nav. you'll never see a "bill" or "deduction" on a statement for expenses.

an_asker
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Re: When does Vanguard take their cut?

Post by an_asker » Mon May 11, 2015 10:04 am

Also note that the Expense Ratio is a trailing (I hope I got the terminology right) statistic, in that it reflects past expenses. If a new start up Rearguard comes up offering an Expense Ratio of 0.00% (don't ask me how or why!), and siphons off half of Vanguard's clients and fund balance, there is a likelihood that the expenses double to 0.10% ... but you will never know this until after the fact (next year).

In other words, in theory, you are as well off chasing fund performance as you are chasing expense ratios (though I might get grief for saying this) though in practice (of course), fund families that have low expense ratios will continue to have low expense ratios going forward.

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Archie Sinclair
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Re: When does Vanguard take their cut?

Post by Archie Sinclair » Mon May 11, 2015 7:32 pm

I wouldn't describe it as "their cut." Vanguard is ultimately owned by its investors and so it only pays expenses, it doesn't take profits. It has to pay these expenses on a daily basis.

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Tycoon
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Re: When does Vanguard take their cut?

Post by Tycoon » Mon May 11, 2015 8:01 pm

I vaguely remember there being a yearly 10 dollar account fee for funds years ago. Perhaps that was T.Rowe Price, Janus, or Dodge and Cox???
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CABob
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Re: When does Vanguard take their cut?

Post by CABob » Mon May 11, 2015 8:10 pm

Tycoon wrote:I vaguely remember there being a yearly 10 dollar account fee for funds years ago. Perhaps that was T.Rowe Price, Janus, or Dodge and Cox???
I could be wrong, but, this sounds more like an account maintenance fee rather than a mutual fund fee. I guess if you have a single fund in an account it would look the same. Many years ago I had an IRA with Dean Witter that had an annual account maintenance fee.
Bob

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Tycoon
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Re: When does Vanguard take their cut?

Post by Tycoon » Mon May 11, 2015 8:37 pm

CABob wrote:
Tycoon wrote:I vaguely remember there being a yearly 10 dollar account fee for funds years ago. Perhaps that was T.Rowe Price, Janus, or Dodge and Cox???
I could be wrong, but, this sounds more like an account maintenance fee rather than a mutual fund fee. I guess if you have a single fund in an account it would look the same. Many years ago I had an IRA with Dean Witter that had an annual account maintenance fee.
I believe you are right.
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