Sat, October 16, 2010
Vanguard Expands Availability of Admiral Class Shares
In a move calculated to undercut competitors, the Vanguard family of funds has announced a reduction in the minimum investment required to gain access to its "Admiral" class of mutual fund shares.
Vanguard introduced the Admiral share class in 2000 for investors who either invested $250,000 or who had already held $150,000 for three years in one of its eligible funds. Admiral shares feature significantly lower fund costs than the same fund in an “Investor” share class; in many cases, the Admiral class fee is comparable to an “institutional” share class offered by some mutual funds to retirement plans. As the cost of owning a mutual fund can have a substantial impact on the long-term return of an investment, the shares are extremely attractive to investors who qualify for them.
Just today I received a letter from Vanguard announcing that the new minimum investment for Admiral class shares will be $50,000 for actively-managed funds and $10,000 for most of its broad-market index funds. The new minimums apply to 52 Vanguard funds. For a fund like Vanguard Total Stock Market Index, this will mean an expense reduction from 0.18% to 0.07%.
Current shareholders whose accounts qualify for the new minimums will be converted automatically, but this change is undoubtedly intended to draw new assets to Vanguard as it increases the fund family’s competitive edge against Schwab and Fidelity.