Lower Minimum on Admiral Shares

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
CaptMidnight
Posts: 757
Joined: Tue May 15, 2007 5:58 am

Post by CaptMidnight »

hotmoney wrote:
Like George Clooney in that movie "up in the air" my life's goal had been a number. A 7 digit portfolio so I could be in the exclusive club at Vanguard. ;) Moving above 500K was a great feeling - Voyager Select - half way to my goal, but hitting those 7 digits and the "exclusivity" that came with being "special" at vanguard - FLAGSHIP, it was like when George Clooney's character got that special airmiles card. Now if everyone on the plane had got that card, what would be so SPECIAL about it. We are all admirals now :( Too many chiefs and not enough indians. Right, you hit the nail on the head, I may be WORSE off now, I thought you and I were OWNERS of vanguard, no one sent me a memo on this change, did they send one to you? Bogle argues in "enough" that the plebians are leaving too much to the managements at many places and investors are getting hoodwinked. As natureexplorer said in another thread, there are lots of things going on, and I don't want to blindly cheerlead any company. I don't like I finally got that special airmiles card and the express lines at hotel checkin, but now everyone is there with me and over many decades I am worry this will lower my total profit.
So, to paraphrase, it's not enough to be rich; others must be poor.
The history of thought and culture is ... a changing pattern of great liberating ideas that inevitably turn in suffocating straightjackets... | --Isaiah Berlin
User avatar
englishgirl
Posts: 2508
Joined: Thu Mar 01, 2007 4:34 pm
Location: FL

Post by englishgirl »

Awww, shucks, I still don't have Admiral. I thought I'd log on this morning and switch over the TIPS fund, but that one is at $50,000 minimum and I'm not there yet. Then with international I have the FTSE Ex-US fund that I just decided to switch to the remodeled Total International but am waiting out 2 months from my last purchase so I don't have to pay a redemption fee. So I can't do anything with that one either, unless I switch to Admiral now and then wait another 2 months to switch to Total International Admiral. Everything else is in my 401k, so no joy with those funds either.

Bah humbug. Oh well, it's still great news, and I'll look forward to making the switch when I can.
Sarah
User avatar
TJAJ9
Posts: 1241
Joined: Sat Sep 12, 2009 3:37 am
Location: Philadelphia, PA

Post by TJAJ9 »

Excellent job, Vanguard. These lower minimums are great. :thumbsup
User avatar
modal
Posts: 1246
Joined: Tue Feb 20, 2007 2:57 pm
Location: USA

Post by modal »

:D , glad I check diehards.org today.

I'm awaiting news on the Commander and Chief Share Class.
RTR2006
Posts: 826
Joined: Thu May 24, 2007 5:38 pm
Location: Near SF...

Post by RTR2006 »

Anyone converting shares held at Schwab? Yesterday the minimum was still $100K; today the site claims that Admiral shares are "not open to new investors" (?).

I am not in a real hurry to convert, but in this case Schwab is a pain...

Any Schwab account holders able to make the switch?

RTR
User avatar
mickeyd
Posts: 4898
Joined: Fri Feb 23, 2007 2:19 pm
Location: Deep in the Heart of South Texas

Post by mickeyd »

I am impressed that VG made it so easy for me to convert my 3 funds that are over $10k and not previously Admiral-qualified. It took me less that 5 minutes to convert them to Admiral. Then again, why didn't VG just convert them w/o me? I guess there is a legal angle that I am missing. Anyway, glad that my expenses just dropped.

--political comment deleted-- Just askin... 8)
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
Beagler
Posts: 3442
Joined: Sun Dec 21, 2008 6:39 pm

Post by Beagler »

[quote="mickeyd"]I am impressed that VG made it so easy for me to convert my 3 funds that are over $10k and not previously Admiral-qualified. It took me less that 5 minutes to convert them to Admiral. Then again, why didn't VG just convert them w/o me? I guess there is a legal angle that I am missing. Anyway, glad that my expenses just dropped.

--political comments deleted--
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
John Thacker
Posts: 17
Joined: Tue Sep 29, 2009 12:42 pm

Post by John Thacker »

CaptMidnight wrote:
So, to paraphrase, it's not enough to be rich; others must be poor.
No, to paraphrase, it's extremely silly to pretend that this change "saved us all a ton of money." There's a good chance that many people will lose by this change-- hopefully outweighed by the number who win.

In the case of airline benefits, some benefits clearly are zero-sum, like being let on the plane first. If everyone gets to board first, then no one really has a benefit.

In markets, benefits are not always zero-sum, but there can still be winners and losers, even if it's a net positive overall. In addition, people are wrong to treat this change as the fundamental cause of any expense ratio lowering, instead of an effect.

Thinking that letting more people into Admiral Shares saves money is like thinking that companies lower prices just to be "nice" or raise them because they're "mean." Raising and lowering prices is an effect of other changes, an attempt to maximize profit and shareholder value.

Similarly, Vanguard expense ratios reflect Vanguard expenses. Vanguard doesn't simply wave a wand and reduce everyone's expense ratios just to be nice-- in fact, if Vanguard could do that, then it should have happened earlier. Admiral Share expense ratios are lower because people who hold larger balances create lower expenses for the funds, and because having that second tier encourages people to hold fewer funds at Vanguard and move their money around less, which lowers overall expenses.

Suppose that a fund has Admiral Shares with an ER of 0.10% and Investor Shares with an ER of 0.18%. Letting some extra people convert Investor Shares to Admiral Shares doesn't, to first-order analysis, reduce those fund costs. So Admiral Shares ER has to rise somewhat to compensate. To the extent that it reduces fund churn and decreases the number of small holdings at Vanguard, it may reduce ER somewhat, which is what allows this to be other than zero-sum.
sscritic
Posts: 21853
Joined: Thu Sep 06, 2007 8:36 am

Post by sscritic »

mickeyd wrote:I am impressed that VG made it so easy for me to convert my 3 funds that are over $10k and not previously Admiral-qualified. It took me less that 5 minutes to convert them to Admiral. Then again, why didn't VG just convert them w/o me? I guess there is a legal angle that I am missing. Anyway, glad that my expenses just dropped.

--political comment deleted-- Just askin... 8)
To give you a serious answer, Vanguard will.
If you're a Vanguard client, you may be eligible for an automatic promotion to Admiral Shares, as explained below. 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.
They used to search their records and do the conversion for qualifying accounts at the end of each quarter, but I cannot find a reference to say that they will continue to do that going forward.
faltuk1
Posts: 99
Joined: Thu Oct 09, 2008 9:58 am

Post by faltuk1 »

Would the conversion result in capital gain tax?
mickeyd wrote:I am impressed that VG made it so easy for me to convert my 3 funds that are over $10k and not previously Admiral-qualified. It took me less that 5 minutes to convert them to Admiral. Then again, why didn't VG just convert them w/o me? I guess there is a legal angle that I am missing. Anyway, glad that my expenses just dropped.

--political comment deleted-- Just askin... 8)
User avatar
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

No tax when exchanging to Admiral status

Post by Taylor Larimore »

Would the conversion result in capital gain tax?
No.

Vanguard answers your question near the bottom of this announcement:

Vanguard lowers the cost of investing once again
"Simplicity is the master key to financial success." -- Jack Bogle
Post Reply