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Portfolio > ETFs

Vanguard Continues to Lower Expenses on ETFs

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Good news for ETF investors: The price war among investment firms continues and Vanguard just became the latest company to reduce the annual expense ratios on several of its ETFs.

The Vanguard ETFs impacted by the lower fees are the following funds:

–Vanguard FTSE All World ex-US ETF (NYSEArca: VEU) is now 0.22 percent

–Vanguard FTSE All World ex-US Small Cap ETF (NYSEArca: VSS) is now 0.33 percent

–Vanguard MSCI Europe ETF (NYSEArca: VGK) is now 0.14 percent

–Vanguard MSCI Pacific ETF (NYSEArca: VPL) is now 0.14 percent

–Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) is now 0.22 percent

–Vanguard Total Stock World ETF (NYSEArca: VT) is now 0.25 percent

Also, Vanguard inserted MSCI into the names of four Vanguard ETFs linked to MSCI indexes. For example, the previously named Vanguard Europe Pacific ETF (VEA) is now known as the Vanguard MSCI EAFE ETF. The ETF Ticker symbols for these MSCI linked funds remain unchanged.

Fee cuts within the ETF marketplace have been happening from two main angles. 

First, brokerage firms continue to eliminate or minimize brokerage commissions to buy and sell certain ETFs and second, fund providers are lowering annual expense ratios on their ETFs. Both moves are a positive development for cost conscious investors.

Expense-ratio reductions within the ETF market are also occurring with narrowly focused industry sector funds.

Earlier in the year, the Select Sector SPDRs, cut annual fees on their nine S&P 500 industry sector ETFs from 0.21% to 0.20%. The funds follow various sectors within the S&P 500 like energy (XLE) and technology (XLK).

Another example of a high profile battle for investor’s money is with gold ETFs.

BlackRock, manager of the iShares Gold Trust (IAU), cut IAU’s annual fees to 0.25 percent making it 0.15 percent cheaper compared to its larger rival the SPDR Gold Shares (GLD). Both gold ETFs have the same investment objective and are hinged to the ounce price of gold bullion. 

Investors that own the Vanguard index mutual fund structure are allowed to convert their shares to the index ETF structure for no additional fee. Vanguard share conversions do not apply to the following four Vanguard's bond ETFs: Total Bond Market (BND), Short-Term Bond (BSV), Intermediate-Term Bond (BIV) and Long-Term Bond (BLV).
The conversion from Vanguard's index mutual funds to Vanguard ETFs is generally tax-free, although some brokerage firms may be unable to convert fractional shares, which could result in a modest taxable gain.

Once you convert from conventional shares to ETF shares, you cannot convert back to conventional shares. Also, conventional shares held through a 401(k) account cannot be converted to the ETF shares of the fund.

At the end of January, Vanguard managed $152.69 billion in 64 ETFs.


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