Author Topic: VTI and VOO are now at 0.03%  (Read 2701 times)

TPLFIRE

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VTI and VOO are now at 0.03%
« on: April 04, 2019, 08:26:41 PM »
I don't currently own ETFs, just  VTSAX.

With the ER drop for the ETFs to 0.03%, I'll be saving some money every year if i converted from VTSAX to VTI.

Does anyone know if VTSAX is likely to drop to 0.03% as well?

***because "A Millionaire is Made Ten Bucks at a Time"

nereo

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Re: VTI and VOO are now at 0.03%
« Reply #1 on: April 05, 2019, 06:56:04 AM »
I don't currently own ETFs, just  VTSAX.

With the ER drop for the ETFs to 0.03%, I'll be saving some money every year if i converted from VTSAX to VTI.

Does anyone know if VTSAX is likely to drop to 0.03% as well?

***because "A Millionaire is Made Ten Bucks at a Time"

Well it would be $10 (annually) in savings per each $100k invested. 
Short answer is "no" - I do not know if VTSAX is likely to drop further, nor have I seen any papers about it over at Vanguard. 
If you really want to chase the lowest fees, you might want to consider Fidelity, which currently lists their total market index (FSKAX) at 0.015% - even lower than VTI and VOO.  Fidelity also launched the first ever zero-fee index funds, with no minimum.

Personally I like Vanguard's client-owned model and I'm willing to 'pay' an extra $20-30/year for it.  I also imagine that Vanguard will drop their yield to stay competitive with Fidelity, but at this point it might become a loss-leader (especially if they were to go to 0.00%).

Proud Foot

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Re: VTI and VOO are now at 0.03%
« Reply #2 on: April 05, 2019, 08:11:02 AM »
When did they drop the ER? I know they announced lower expense ratios for 10 ETF's in February but those two were not in the list. The Vanguard site is also still showing a 0.04% ER.

Like nereo said its only $10 savings annually per $100k invested. This also doesn't take into account the potential costs of not having all your money invested since you cannot buy partial shares of ETF's.

Eric

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Re: VTI and VOO are now at 0.03%
« Reply #3 on: April 05, 2019, 11:58:42 AM »
If you really want to chase the lowest fees, you might want to consider Fidelity, which currently lists their total market index (FSKAX) at 0.015% - even lower than VTI and VOO.  Fidelity also launched the first ever zero-fee index funds, with no minimum.

Personally I like Vanguard's client-owned model and I'm willing to 'pay' an extra $20-30/year for it.  I also imagine that Vanguard will drop their yield to stay competitive with Fidelity, but at this point it might become a loss-leader (especially if they were to go to 0.00%).

I'm not sure Fidelity is actually cheaper when you look at the total package.  Sure, the expense ratios are a bit lower, but the capital gains distributions are A LOT higher.  So if you're buying in a taxable account, VTI/VTSAX is sure to win.  They haven't distributed any capital gains for almost 2 decades now.  It's really incredible.

https://www.bogleheads.org/wiki/Vanguard_Total_Stock_Market_Index_Fund_tax_distributions

nereo

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Re: VTI and VOO are now at 0.03%
« Reply #4 on: April 05, 2019, 12:32:38 PM »
If you really want to chase the lowest fees, you might want to consider Fidelity, which currently lists their total market index (FSKAX) at 0.015% - even lower than VTI and VOO.  Fidelity also launched the first ever zero-fee index funds, with no minimum.

Personally I like Vanguard's client-owned model and I'm willing to 'pay' an extra $20-30/year for it.  I also imagine that Vanguard will drop their yield to stay competitive with Fidelity, but at this point it might become a loss-leader (especially if they were to go to 0.00%).

I'm not sure Fidelity is actually cheaper when you look at the total package.  Sure, the expense ratios are a bit lower, but the capital gains distributions are A LOT higher.  So if you're buying in a taxable account, VTI/VTSAX is sure to win.  They haven't distributed any capital gains for almost 2 decades now.  It's really incredible.

https://www.bogleheads.org/wiki/Vanguard_Total_Stock_Market_Index_Fund_tax_distributions
Interesting.  that's not something I have considered before, and another reason I'm planning on staying with Vanguard.  Not that capital gains distributions would affect me greatly right now, but it certainly could in the future.

Indexer

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Re: VTI and VOO are now at 0.03%
« Reply #5 on: April 05, 2019, 07:16:59 PM »
If you really want to chase the lowest fees, you might want to consider Fidelity, which currently lists their total market index (FSKAX) at 0.015% - even lower than VTI and VOO.  Fidelity also launched the first ever zero-fee index funds, with no minimum.

Personally I like Vanguard's client-owned model and I'm willing to 'pay' an extra $20-30/year for it.  I also imagine that Vanguard will drop their yield to stay competitive with Fidelity, but at this point it might become a loss-leader (especially if they were to go to 0.00%).

I'm not sure Fidelity is actually cheaper when you look at the total package.  Sure, the expense ratios are a bit lower, but the capital gains distributions are A LOT higher.  So if you're buying in a taxable account, VTI/VTSAX is sure to win.  They haven't distributed any capital gains for almost 2 decades now.  It's really incredible.

https://www.bogleheads.org/wiki/Vanguard_Total_Stock_Market_Index_Fund_tax_distributions


True, and there is also securities lending income to account for. Once you account for that you end up with a net expense ratio of about 0.01%. Has Fidelity said whether the 'free' funds will give their securities lending income back to clients or is that how Fidelity if making money on the funds?

A good way to measure an index fund is to compare it's 10 year returns to it's benchmark. VTSAX is normally within 0.01 to 0.02, which is less than it's expense ratio.

Quote
Does anyone know if VTSAX is likely to drop to 0.03% as well?

It's safe to say the question is when, not if. Vanguard has a long history of lowering fees as they achieve greater economies of scale.

flipboard

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Re: VTI and VOO are now at 0.03%
« Reply #6 on: April 06, 2019, 04:34:48 AM »
If you really want to chase the lowest fees, you might want to consider Fidelity, which currently lists their total market index (FSKAX) at 0.015% - even lower than VTI and VOO.  Fidelity also launched the first ever zero-fee index funds, with no minimum.

Personally I like Vanguard's client-owned model and I'm willing to 'pay' an extra $20-30/year for it.  I also imagine that Vanguard will drop their yield to stay competitive with Fidelity, but at this point it might become a loss-leader (especially if they were to go to 0.00%).

I'm not sure Fidelity is actually cheaper when you look at the total package.  Sure, the expense ratios are a bit lower, but the capital gains distributions are A LOT higher.  So if you're buying in a taxable account, VTI/VTSAX is sure to win.  They haven't distributed any capital gains for almost 2 decades now.  It's really incredible.

https://www.bogleheads.org/wiki/Vanguard_Total_Stock_Market_Index_Fund_tax_distributions
Why do people insist on bringing up cap gains distributions for funds as an issue when you can just go and buy an ETF instead?

I'm actually not familiar with Fidelity's offerings, but cheaper ETF's have been available at Schwab for years and years.

nereo

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Re: VTI and VOO are now at 0.03%
« Reply #7 on: April 06, 2019, 04:38:17 AM »

Why do people insist on bringing up cap gains distributions for funds as an issue when you can just go and buy an ETF instead?

For all the reasons why one might choose an index fund over its corresponding ETF - e.g. the ability to buy and sell partial shares.

TPLFIRE

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Re: VTI and VOO are now at 0.03%
« Reply #8 on: April 06, 2019, 08:11:45 AM »
Thanks everyone for your thoughts. Really appreciate it.

I like Vanguard's client-owned model too so I'm staying with Vanguard.

I did notice that VTI is still stated as 0.04% on its website but stated as "Expense ratio
as of 04/25/2018"

I was also trying to find other places stating this drop with no success besides the link below mentioning VOO.
https://www.barrons.com/articles/vanguard-sp-500-etf-fee-cut-51551457258

The first place I saw it was on my msn money app (see attached snapshot) but when I logged into MSN's website, it says 0.04%
https://www.msn.com/en-us/money/etfdetails/arcx-vti/fi-a25lrw

I'm assuming it's still at 0.04 for now until I see further prove.  Thanks again everyone for your thoughts on this topic.

flipboard

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Re: VTI and VOO are now at 0.03%
« Reply #9 on: April 06, 2019, 10:18:10 AM »

Why do people insist on bringing up cap gains distributions for funds as an issue when you can just go and buy an ETF instead?

For all the reasons why one might choose an index fund over its corresponding ETF - e.g. the ability to buy and sell partial shares.
Is avoiding average $20-$30 sitting around in your account really worth all that hassle? (Hint: unless you only tiny amounts invested, then no.)

nereo

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Re: VTI and VOO are now at 0.03%
« Reply #10 on: April 06, 2019, 11:27:33 AM »

Why do people insist on bringing up cap gains distributions for funds as an issue when you can just go and buy an ETF instead?

For all the reasons why one might choose an index fund over its corresponding ETF - e.g. the ability to buy and sell partial shares.
Is avoiding average $20-$30 sitting around in your account really worth all that hassle? (Hint: unless you only tiny amounts invested, then no.)

For me and many posters here, it is.
ETFs aren't particularly practical for tax-advantaged accounts with strict caps (e.g. IRAs) because purchasing in full shares means you will leave headspace behind.
Personally, after contributing our family max to the HSA, IRAs and enough to our 401(k)s we have little left to invest, so buying in full shares into VOO (at $250+/share) in our taxable accounts also makes little sense.  We're not terribly worried about distributions given our income and tax bracket.

Others - particularly those starting out their journey - the convenience of index funds outweigh the benefits of ETFs. For example, for many its far simpler to autocontribute $100 each week than to buy full shares less frequently and to not know what the cost of htose shares will be month(s) in advance when budgeting.

Both ETFs and index funds are good, but neither can claim to be the best for all clients.

TomTX

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Re: VTI and VOO are now at 0.03%
« Reply #11 on: April 06, 2019, 12:54:40 PM »

Why do people insist on bringing up cap gains distributions for funds as an issue when you can just go and buy an ETF instead?

For all the reasons why one might choose an index fund over its corresponding ETF - e.g. the ability to buy and sell partial shares.
Is avoiding average $20-$30 sitting around in your account really worth all that hassle? (Hint: unless you only tiny amounts invested, then no.)

For me and many posters here, it is.
ETFs aren't particularly practical for tax-advantaged accounts with strict caps (e.g. IRAs) because purchasing in full shares means you will leave headspace behind.
Personally, after contributing our family max to the HSA, IRAs and enough to our 401(k)s we have little left to invest, so buying in full shares into VOO (at $250+/share) in our taxable accounts also makes little sense.  We're not terribly worried about distributions given our income and tax bracket.

Others - particularly those starting out their journey - the convenience of index funds outweigh the benefits of ETFs. For example, for many its far simpler to autocontribute $100 each week than to buy full shares less frequently and to not know what the cost of htose shares will be month(s) in advance when budgeting.

Both ETFs and index funds are good, but neither can claim to be the best for all clients.

Merrill Edge paying me $600 to move over from Vanguard was more than enough to cover some decades missed gains due to the fractional share issue caused by going to VTI from VTSAX.

Telecaster

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Re: VTI and VOO are now at 0.03%
« Reply #12 on: April 06, 2019, 01:15:57 PM »

I'm not sure Fidelity is actually cheaper when you look at the total package.  Sure, the expense ratios are a bit lower, but the capital gains distributions are A LOT higher.  So if you're buying in a taxable account, VTI/VTSAX is sure to win.  They haven't distributed any capital gains for almost 2 decades now.  It's really incredible.

https://www.bogleheads.org/wiki/Vanguard_Total_Stock_Market_Index_Fund_tax_distributions

Thanks!  I didn't know that.   

flipboard

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Re: VTI and VOO are now at 0.03%
« Reply #13 on: April 07, 2019, 01:38:52 PM »

Why do people insist on bringing up cap gains distributions for funds as an issue when you can just go and buy an ETF instead?

For all the reasons why one might choose an index fund over its corresponding ETF - e.g. the ability to buy and sell partial shares.
Is avoiding average $20-$30 sitting around in your account really worth all that hassle? (Hint: unless you only tiny amounts invested, then no.)

For me and many posters here, it is.
ETFs aren't particularly practical for tax-advantaged accounts with strict caps (e.g. IRAs) because purchasing in full shares means you will leave headspace behind.
Personally, after contributing our family max to the HSA, IRAs and enough to our 401(k)s we have little left to invest, so buying in full shares into VOO (at $250+/share) in our taxable accounts also makes little sense.  We're not terribly worried about distributions given our income and tax bracket.

Others - particularly those starting out their journey - the convenience of index funds outweigh the benefits of ETFs. For example, for many its far simpler to autocontribute $100 each week than to buy full shares less frequently and to not know what the cost of htose shares will be month(s) in advance when budgeting.

Both ETFs and index funds are good, but neither can claim to be the best for all clients.
I don't disagree with you for tax-advantaged accounts. But those weren't ever part of the discussion since the whole complaint was about capital gains distributions from non-Vanguard funds, which don't matter for tax-advantaged accounts.

Which leaves the case of someone with $100 to invest per week: they aren't going to be able to invest in a Vanguard fund for a long time anyway because of the minimums. Once they reach the minimum for e.g. VTSAX/VFINX, they're giving away similar amounts per year on the higher TER than they would gain on the $30 fraction they couldn't invest. (Edited: I miscalculated the numbers and originally thought there was a large difference, it turns out to be about the same order of magnitude in the end.)

Which only leaves the convenience factor. Indeed, if you care more about convenience than maximising the last millipercentage of gain, then funds are better than ETF's. Financially they're a wash.
« Last Edit: April 08, 2019, 07:24:27 AM by flipboard »

Kalergie

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Re: VTI and VOO are now at 0.03%
« Reply #14 on: April 08, 2019, 02:59:49 AM »

True, and there is also securities lending income to account for. Once you account for that you end up with a net expense ratio of about 0.01%. Has Fidelity said whether the 'free' funds will give their securities lending income back to clients or is that how Fidelity if making money on the funds?


I was considering securities lending through IB. Is it at all predictable how much income could be generated through this? Also, what is this income considered as? Interest?

Indexer

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Re: VTI and VOO are now at 0.03%
« Reply #15 on: April 08, 2019, 03:40:42 PM »

True, and there is also securities lending income to account for. Once you account for that you end up with a net expense ratio of about 0.01%. Has Fidelity said whether the 'free' funds will give their securities lending income back to clients or is that how Fidelity if making money on the funds?


I was considering securities lending through IB. Is it at all predictable how much income could be generated through this? Also, what is this income considered as? Interest?


I believe its added to the dividends, or at least taxed that way. It's pretty predictable. VEXAX has outperformed it's benchmark by about 0.1% per year over the past 10 years because it's securities lending income is greater than it's expenses.

flipboard

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Re: VTI and VOO are now at 0.03%
« Reply #16 on: April 09, 2019, 11:35:42 PM »

True, and there is also securities lending income to account for. Once you account for that you end up with a net expense ratio of about 0.01%. Has Fidelity said whether the 'free' funds will give their securities lending income back to clients or is that how Fidelity if making money on the funds?


I was considering securities lending through IB. Is it at all predictable how much income could be generated through this? Also, what is this income considered as? Interest?


I believe its added to the dividends, or at least taxed that way. It's pretty predictable. VEXAX has outperformed it's benchmark by about 0.1% per year over the past 10 years because it's securities lending income is greater than it's expenses.
That's a completely different thing: when a fund lends securities, that income comes out via reduced expenses and/or dividends.

When you lend your securities at IB, you receive "Payments In Lieu" (PIL). Tax-treatment varies by country, you might lose advantaged dividend treatment in some countries.

You can read for yourself  how it works at:
https://ibkr.info/node/1838/

Kalergie

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Re: VTI and VOO are now at 0.03%
« Reply #17 on: April 10, 2019, 12:05:43 AM »
Thanks for clarifying that to me. Good to know.