Barron's--Vanguard Is Losing Battles on Two Fronts in Fee Wars

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David Jay
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Re: Barron's--Vanguard Is Losing Battles on Two Fronts in Fee Wars

Post by David Jay » Tue Sep 11, 2018 8:01 pm

Whakamole wrote:
Tue Sep 11, 2018 5:30 pm
David Jay wrote:
Tue Sep 11, 2018 3:59 pm
2 Tasty wrote:
Tue Sep 11, 2018 12:26 pm
Low fees are great, but what's behind the curtain? Looking through Fidelity's website, low fees for the couple of ZERO funds are more than offset by extravagant fees on the other 300+ funds.
And they deliberately hide some of their low cost funds. If you type in "Freedom Index 2040" (the low cost index version) in the search box on the Fidelity home page, the context sensitive help suggests "Freedom 2040" (the high cost version) and does not show the index result.
Are you certain? I just tried it and it shows the Index fund:

Image
I am not repeating what someone else said. I discovered it myself within the last 3 months. They may have updated their search algorithm.
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roymeo
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Re: Barron's--Vanguard Is Losing Battles on Two Fronts in Fee Wars

Post by roymeo » Tue Sep 11, 2018 8:18 pm

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venkman
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Re: Barron's--Vanguard Is Losing Battles on Two Fronts in Fee Wars

Post by venkman » Tue Sep 11, 2018 10:23 pm

MichCPA wrote:
Tue Sep 11, 2018 11:58 am
It would require 9,000 across two accounts to get into the three fund investor class in less than one year and you still couldn't make it work on admiral for about 3 years. Even adding the extra account doesn't really change the fact that minimums add complexity you don't see at competitors. But getting back to my point on the average person, 9,000 is 15% of 60,000, so in order to make that happen in a year with the 401k contribution in the example you would have a 21% savings rate. That isn't realistic for most people (non-Bogleheads). If Vanguard can provide ETFs in smaller increments at low cost why can't they do the same for mutual funds? I don't have a good answer to that. As I originally mentioned it is a small issue, but I don't understand why it has to be an issue at all.
Vanguard's Target Retirement funds have a $1,000 minimum, and are effectively an instant 3-fund portfolio (with a small amount of international bonds). An investor could add to a TR fund until it reaches $30k, then reallocate into Admiral shares of the individual 3 funds. The extra 10 basis points for being in all Investor shares at $30k is $30/year. And that's the MOST extra you'd pay, since $30k is the point you could move to all Admiral shares.

The reason other places have zero minimums is that they're willing to lose money on new customers in the hopes that those new customers will eventually bring in a lot more money. Vanguard isn't willing to do that, because they operate at cost. If they lost money on new customers, they'd have to charge existing customers more to make up for it. This is one of reasons I like having my money at VG--the fees I pay are what it costs VG to service my account. I know they aren't trying to take money from me in order to grow the business and make more money for themselves.

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willthrill81
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Re: Barron's--Vanguard Is Losing Battles on Two Fronts in Fee Wars

Post by willthrill81 » Tue Sep 11, 2018 10:36 pm

venkman wrote:
Tue Sep 11, 2018 10:23 pm
MichCPA wrote:
Tue Sep 11, 2018 11:58 am
It would require 9,000 across two accounts to get into the three fund investor class in less than one year and you still couldn't make it work on admiral for about 3 years. Even adding the extra account doesn't really change the fact that minimums add complexity you don't see at competitors. But getting back to my point on the average person, 9,000 is 15% of 60,000, so in order to make that happen in a year with the 401k contribution in the example you would have a 21% savings rate. That isn't realistic for most people (non-Bogleheads). If Vanguard can provide ETFs in smaller increments at low cost why can't they do the same for mutual funds? I don't have a good answer to that. As I originally mentioned it is a small issue, but I don't understand why it has to be an issue at all.
Vanguard's Target Retirement funds have a $1,000 minimum, and are effectively an instant 3-fund portfolio (with a small amount of international bonds). An investor could add to a TR fund until it reaches $30k, then reallocate into Admiral shares of the individual 3 funds. The extra 10 basis points for being in all Investor shares at $30k is $30/year. And that's the MOST extra you'd pay, since $30k is the point you could move to all Admiral shares.

The reason other places have zero minimums is that they're willing to lose money on new customers in the hopes that those new customers will eventually bring in a lot more money. Vanguard isn't willing to do that, because they operate at cost. If they lost money on new customers, they'd have to charge existing customers more to make up for it. This is one of reasons I like having my money at VG--the fees I pay are what it costs VG to service my account. I know they aren't trying to take money from me in order to grow the business and make more money for themselves.
I wonder if the people upset about spending $30 in ERs for a $30k portfolio are equally frugal in all other aspects of their lives. I'm inclined to doubt that they are.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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