Effective 26 April 2007, Vanguard is changing its fee structure. It used to be that Vanguard charged “small” accounts an extra $10 per year. For example:
Old fee structure
- $10 per year for each index fund with less than $3,000 invested
- $10 per year for any fund with less than $2,500
- $10 per year for an IRA with less than $5,000
As of today, this changes.
New fee structure
- $20 per year for each fund with less than $10,000 invested
Simple, huh? “But wait a minute,” you say, “this actually looks worse for the starting investor than before.” At a glance, this looks to be the case.
HOWEVER, you can avoid the service fee entirely by simply enrolling in online delivery of statements! Vanguard will begin assessing the service fee in June, so choose online statement delivery soon to avoid all fees. I updated my preferences a few minutes ago.
I think this is great news because I’ve been intending to diversify my lineup of funds for a little while now, but did not want to pay extra fees for having low balances. For example, I would like to add a couple extra index funds to my non-retirement portfolio, which currently contains mostly the Total Stock Market Index fund (VTSMX). If I add two extra index funds, such as a small-cap fund and an international fund, and each of these funds has a balance lower than $10,000, I will save $30 per year, provided that I stay enrolled in online statements. Sounds good to me.
In summary, Vanguard keeps getting better.
Read the official announcement here.