Author Topic: Vanguard 401k/403b and fund minimums  (Read 1256 times)

Derrian

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Vanguard 401k/403b and fund minimums
« on: January 18, 2015, 12:33:11 PM »
I just started a 403b with vanguard and three funds I have selected have fund minimums for investor shares. The three funds are:

VTSMX Total Stock Market @ 70%
VGTSX Total International @ 25%
VBMFX Total Bond Market @ 5%

Question: if each fund has a minimum of $3000, it will take a while for the international/bond market fund to have enough to meet the minimum. Is there a better place to put funds until I have enough to meet all three fund minimums or should I stick the course?

MDM

  • Walrus Stache
  • *******
  • Posts: 9711
Re: Vanguard 401k/403b and fund minimums
« Reply #1 on: January 18, 2015, 01:21:02 PM »
VTTSX is one possibility.  It contains:
1   Vanguard Total Stock Market Index Fund Investor Shares              62.8%
2   Vanguard Total International Stock Index Fund Investor Shares    27.1%
3   Vanguard Total Bond Market II Index Fund Investor Shares†           8.2%
4   Vanguard Total International Bond Index Fund Investor Shares       1.9%

5oclockshadow

  • 5 O'Clock Shadow
  • *
  • Posts: 19
Re: Vanguard 401k/403b and fund minimums
« Reply #2 on: January 18, 2015, 02:46:37 PM »
FYI, every company charges a 401k/403b administration fee on top of their expense ratios for individual funds.  For some reason, this fee doesn't get much press.  Vanguard charges $15 per fund (that is PER FUND,  not per account).  So, if you have $10,000 divided into 3 Vanguard funds with an average expense ratio of 0.15%, you'll be paying $15 annually in fund expenses (the expense ratio) and $45 annually for the plan administration fees.  So, your diversification into three funds instead of one fund just doubled your annual expenses from $30 to $60.  I would contend that at least while your 403b is rather small, it is best to just throw everything into one fund to minimize your fees, even if that one fund has a somewhat higher expense ratio than the individual funds you are considering.  If you want US/International/Bond exposure, just get the target date fund that matches your desired allocation and reevaluate in a couple years when you have a larger account balance.

Derrian

  • 5 O'Clock Shadow
  • *
  • Posts: 68
Re: Vanguard 401k/403b and fund minimums
« Reply #3 on: January 18, 2015, 03:34:32 PM »
MDM, thank you for the suggestion. I think that is the best route, especially given what 5oclockshadow mentioned with the $15 fee. Thank you both for your help!