Vanguard has announced that it is lowered the minimum required investment on the Admiral Shares of its index funds to $3,000, down from $10,000. Basically, if you owned the Investor Shares of one of their 38 index funds, you will own the cheaper Admiral Shares with no effort and no tax issues. You can perform this conversion manually if you don’t want to wait for them to do it for you. Good deal.
Alternatively, you may use this as an opportunity to spread your money across more funds due to this change. This would be bigger news, but a lot more people now own the ETF versions. I still remember in 2010 when Admiral Shares went from a $100,000 minimum investment down to $10,000. Note that this does not apply to Vanguard’s actively-managed funds, which are still at $50,000 for Admiral Shares.
In early November, Fidelity removed all investment minimums on their mutual funds. They also gave every investor in their funds the lowest expense ratio available in any share class, usually the ones for their institutional customers. For example, the Fidelity Inflation-Protected Bond Index Fund (FIPDX) now has an annual expense ratio of 0.05% with a $0 minimum investment, even lower than the Admiral Shares of Vanguard Inflation-Protected Securities Fund (VAIPX) at 0.10% which still requires a $50,000 minimum investment as it is an actively-managed fund.
I still have the majority of my investment portfolio held at Vanguard, but it appears that Fidelity has finally woken up from it’s “Let’s Pretend Index Funds Don’t Matter” slumber. (See Bloomberg interview.) Vanguard may deny it, but I think the current asset-chasing, expansion-minded Vanguard does respond to competition.
The trend continues. Anyone today can build a dirt-cheap index fund portfolio with Vanguard, Fidelity, Schwab, and iShares, and those portfolios keep getting cheaper and cheaper. The hard part will be sticking with your portfolio when you’re balances start shrinking.
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I just took a look at FIPDX which has a 30 day SEC Yield of 1.64%. An Ally Money Market is paying 2%, TIPS on Treasury Direct are paying around 2.76% for the next 6 months and 1 year brokered CDs are paying just over 2%. So….what’s the appeal of a FIPDX…..I don’t understand why anyone would want to invest in it.
I wonder if this will result in lower expenses for the Target Date Funds, which are compilations of the investor share, rather than admiral share, versions of several funds?
That’s a great question. I would assume the answer to be yes, but it hasn’t been reflected on their website yet.
The answer would be no, they specifically stated that Fund-of-funds would still use Investor Share classes.
It just seems weird that they would keep the investor shares at the same price, just so they could charge more money to Target and Lifecycle funds investors. You say you’ll only charge the fees of the underlying funds, but then you don’t adjust when the underlying funds get cheaper? (The investor shares are now completely closed to new investors.) Doesn’t seem very fair or Vanguard-ish. If they keep this sort of stuff up, I’m going to start losing faith in Vanguard.
I know this is an older post, but Vanguard customer service is still awful. Are admiral shares only valid at Vanguard? That is, if I were to transfer my account to another firm, will it revert to investor shares?
You could try to convert to ETF and then transfer to an outside brokerage. (This assumes that there is an ETF version of your fund.)
You can usually transfer Admiral Shares to another broker, but you can then only sell, not buy additional shares.
Wow thanks for the fast response and sharing your knowledge!