Vanguard made another announcement that effective today (10/6), the minimum amount required to qualify for Admiral Shares has been reduced to $10,000 for most of their index funds and $50,000 for actively-managed funds, significantly reduced from the previous $100,000 minimum.
Admirals shares are a separate share class of 52 mutual funds in addition to the standard Investor shares. While owning the same underlying investments, they also take advantage of the cost savings of big accounts and thus have lower annual expense ratios. According to their press release, the lowered requirements means that nearly half of all Vanguard clients can take advantage of at least one of these Admiral funds.
Here is a chart comparing Investor vs. Admiral shares costs for three major funds, along with the overall average across for all similar funds:
Here’s another comparison chart of the same broad funds with similar competitors from Fidelity and Schwab. Note that there are some differences in actual fund holdings, especially in the international funds (click to enlarge with more details):
Here’s a list of excluded index funds:
The minimum amount to qualify for Admiral Shares will remain at $100,000 for the following sector index funds: Consumer Discretionary Index Fund, Consumer Staples Index Fund, Energy Index Fund, Financials Index Fund, Health Care Index Fund, Industrials Index Fund, Information Technology Index Fund, Materials Index Fund, Telecommunication Services Index Fund, and Utilities Index Fund, and for the following tax-managed funds: Tax-Managed Capital Appreciation Fund, and Tax-Managed Growth and Income Fund.
I’m probably going to switch to the Admiral Shares of Vanguard Total International Stock (VGTSX, ER 0.20%) when it comes out, away from the Vanguard FTSE All-World ex-US ETF (VEU , ER 0.25%) which I just converted to. Their holdings are now pretty close. While I don’t mind ETFs that much, they are a bit more work because I like to make a limit order during stock market hours in order to get a proper fill. (I don’t like market orders in case there is another flash crash or similar.) If it’s both cheaper and easier, I gotta go for it.
This will also keep me from converting some of my other mutual funds to ETFs, as the expense difference will either be gone or significantly minimized. They say that the newly qualified folks will have their funds transferred over – with no tax consequences – automatically over the next few weeks. If you’re impatient like me, you can manually request it as well online. Just log into your account at Vanguard and look for the “Convert to Admiral Shares” link. It’s always nice to save some money without doing anything at all.
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Do you think they will ever use the Admiral funds inside of the Target Retirement funds?? This would make sense because of the total assets invested in these funds through employer-sponsored retirement plans as well as individual investors. Based on the asset size it would be nice to see Vanguard make that move. It would fall in line with the move they are making now.
Another reason I love Vanguard, THEY are always finding ways to save ME money…take note every other company I do business with!
Thanks for the heads up! I logged in and converted to admiral shares. Easy.
Anyone know if this will lower the expense ratio’s on the target retirement funds?
Woot! Seems like this is a good reason not to do autopilot with the Target Retirement Funds.
This is GREAT news! Thanks for the info!
WOW! Thanks for the info. I really need to start investing ASAP!
Is the $10,000 requirement for each specific fund?
@DCSponsor, Bill – I don’t know, I believe historically they don’t make Admiral Shares for “funds of funds”. It would be nice if they did.
@Baughman – Yes, if you have significant balances then I might be tempting to switch out.
@Eman – Yes, $10k in each mutual (index) fund you wish to make Admiral.
Hi,
For VEMAX (Vanguard Emerging Markets Stock Index Fund Admiral Shares ), they have purchase and redemption fee.
How is that compared with the equivalent ETF (Vanguard Emerging Markets ETF (VWO) which doesnt have any purchase or redemption fee ?
Is there any advantage buying the VEMAX compared with VWO ?
Great news! Too bad it doesn’t apply to target retirement funds
Ditto here. Always a Vanguard fan. Always a Boglehead.
Although I called this morning & asked the gal to change it but I think she meant *I* could do it online, so I waited ’til tonight & still didn’t see any pending Admiral shares, so I just did it myself.
Also……..didn’t even think about my taxable account potentially being a taxable move, but nice to know it sounds like it’s not considered a taxable event…..(whew!).
I’ve been laughed at for sticking w/ Vanguard and I can’t imagine I’ve made any better financial decision in my life. I’ll let them play the “hare”. I’ll be the “tortoise”, thank you very much!
Thanks for the heads up! Just converted my small cap & emerging market funds.
For those of us with Target Retirement accounts looking to switch to Admiral funds, it would be great to get some thoughts on allocations/per retirement age…maybe a chart?
This is pretty awesome news. Thanks for the super detailed analysis of the funds and it’s always interesting to track what you personally are doing!
Well, it’s certainly very good that Vanguard yet again figures out a way to cost us less, but their slowness in reshuffling their international index fund lineup over the past couple of years has been, in the end, annoying. I now really think they should’ve never introduced the FTSE ex-US funds, and just changed Total International like they’re doing now.
Cuz now I’ve got a five-figure taxable position on VFWIX that I’d sure like to switch to Total International Admiral, but have to crank the math on cap gains vs. half the ER over 30 years (and compare to just switching to VEU). Only to probably have Vanguard come out with an Admiral-class FTSE fund a year from now…
Thanks Jonathan! I love that you track Vangaurd… you keep me on the heads up on everything!
WTF is the little blue box with the pic of the bird that appears in
the far right of my screen? Something to do with twitter? I like your
blog, but I don’t
need this crapola, sorry for speaking plainly
I noticed the share prices of Investor and Admiral are not the same during the conversion. Converting $10,000 from Inv to Adm will ultimately get you less shares and hence less dividends. If that’s the case, is this really a smart move?
Byron: While there can be a difference in the share price of Admiral class funds, they generally pay a higher dividend rate. Combined with the lower cost, you’ll come out ahead with Admiral shares over the long haul. For instance, VTSMX yields 1.48%, while the Admiral share class yields 1.60%. Expenses for Admiral shares saves 11 basis points (.07 vs .18) while earning an extra 12 basis points in dividends.
Good to know this was from a recent change. I was a shareholder whose balances were automatically converted and when I learned that I qualified over $10,000, I was curious why it took so long to automatically convert. Clearly, it was a *recent* change so it didn’t take long at all.
Thanks for covering this news in your blog!!
Ok, so if I buy a consumer discretionary fund with 100K and then reduce my holding, to say 50K, what happens? Do I pay a higher fee, do I have to sell everything, am I foreclosed from selling?
Confused about this.
@John – If you sell shares to get down below the minimum, they will convert you to regular Investor Shares. You don’t technically sell and no tax hit. If the value goes down just due to market movement, you get to keep Admiral shares. Hope that helps.