Why does VTI have a fee of .04?

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VINNY
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Why does VTI have a fee of .04?

Post by VINNY » Sat Dec 16, 2017 2:52 pm

I was under the assumption that if I bought a stock in my brokerage account, the stock itself would not charge an on going fee. At least that’s what I believe.

If I am correct, why does VTI that trades like a stock, charge a fee?

Is it because it’s a mutual fund that trades like a stock, so the expense ratio still applies?

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whodidntante
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Re: Why does VTI have a fee of .04?

Post by whodidntante » Sat Dec 16, 2017 2:55 pm

It's an exchange traded fund, not a stock. The fee covers their costs to run the fund.

Thesaints
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Re: Why does VTI have a fee of .04?

Post by Thesaints » Sat Dec 16, 2017 2:55 pm

ETF's, which trade like stocks but are no stocks, have an expense ratio used to compensate their issuer for their upkeep.

lack_ey
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Re: Why does VTI have a fee of .04?

Post by lack_ey » Sat Dec 16, 2017 3:00 pm

It's an investment fund, yes, operating as dictated under relevant law and regulations under the '40 Act like most mutual funds. It's not really charging a fee but taking money out of assets (well, dividend payouts from underlying holdings) to pay the fund sponsor/management and cover costs. The rate is as you see.

There are other structures that trade like stocks that also have expense ratios, like closed-end funds.

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JoMoney
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Re: Why does VTI have a fee of .04?

Post by JoMoney » Sat Dec 16, 2017 3:02 pm

VINNY wrote:
Sat Dec 16, 2017 2:52 pm
...Is it because it’s a mutual fund that trades like a stock, so the expense ratio still applies?
Yup.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Alexa9
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Re: Why does VTI have a fee of .04?

Post by Alexa9 » Sat Dec 16, 2017 3:10 pm

.04 is pretty insignificant unless you're a billionaire. It's still insignificant compared to the returns though and well worth the price.

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David Jay
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Re: Why does VTI have a fee of .04?

Post by David Jay » Sat Dec 16, 2017 3:22 pm

For perspective, the fee is $40 per year for every $100,000 of VTI that you hold.
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livesoft
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Re: Why does VTI have a fee of .04?

Post by livesoft » Sat Dec 16, 2017 3:23 pm

And don't forget that the expense ratio is distinct from the SEC fee collected by your broker when you sell shares of VTI (and any other ETF).
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VINNY
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Re: Why does VTI have a fee of .04?

Post by VINNY » Sat Dec 16, 2017 3:32 pm

Thanks for the responses, I agree that the fee is low and I'm not complaining about it. I thought to myself that I would continue to invest in Total Stock Market but in the ETF instead of VTSAX, assuming I'd save the 4 basis points that VTSAX charges. I quickly found out that I was wrong :oops:

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David Jay
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Re: Why does VTI have a fee of .04?

Post by David Jay » Sat Dec 16, 2017 3:40 pm

In the case of Vanguard, the two funds (VTSAX and VTI) are actually different classes of the same fund.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Epsilon Delta
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Re: Why does VTI have a fee of .04?

Post by Epsilon Delta » Sat Dec 16, 2017 6:04 pm

If you look at the annual report for a typical (non ETF) stock you will see lots of "fees", except they call them expenses. The things that VTI pays for such as directors fees, computers, building, auditing etc are all in most company annual reports.

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