Vanguard, the second largest U.S. issuer of exchange-traded funds (ETFs), is widely viewed as one of the fund industry's low cost leaders. The company continually reaffirms that status with a batch of fee reductions on its ETFs and mutual funds over the course of any given year, and that theme is continuing in 2017. Last Friday, Pennsylvania-based Vanguard said the Vanguard Total Stock Market ETF (VTI) will now charge 0.04 percent per year, or $4 on a $10,000 investment, down from 0.05 percent. VTI is the ETF share class of the wildly popular Vanguard Total Stock Market Index Fund, which across all its share classes has a whopping $550 billion in assets under management.
VTI had $76.2 billion in assets under management at the end of the first quarter, according to issuer data. With the new expense ratio, VTI is cheaper than 96 percent of competing funds, according to Vanguard. VTI holds 3,600 stocks. Vanguard also lowered the annual fees on three other share classes of the Vanguard Total Stock Market Index Fund. "Introduced in 1992, the Total Stock Market Index Fund provides diversified exposure to the entire U.S. stock market by seeking to track the CRSP U.S. Total Market Index. In July 2013, the fund crossed $267 billion, becoming the largest mutual fund," said Vanguard in a statement. (See also: Vanguard Total Stock Market ETF.)
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The Vanguard S&P 500 ETF (VOO) is also charging 0.04 percent per year, down from 0.05 percent. That ties VOO with the iShares Core S&P 500 ETF (IVV) for the title of cheapest S&P 500 ETF. Like VTI, VOO is cheaper than 96 percent of rival funds, according to issuer data. Vanguard also lowered fees on two other share classes of its S&P 500 index funds. (See also: A Look Inside the Vanguard S&P 500 ETF.)
On the fixed income side, Vanguard pared the annual fee on the Vanguard Total Bond Market ETF (BND) to 0.05 percent from 0.06 percent. That ties BND with the rival iShares Core U.S. Aggregate Bond ETF (AGG). BND has $33.1 billion in assets under management compared to $44.1 billion for AGG. BND holds over 8,600 bonds and has an average duration of just over six years.
"The Total Bond Market Index Fund, introduced in 1986 as Vanguard's second index fund and the industry's first fixed income index fund, became the largest bond fund in May 2015," said Vanguard in the statement. Vanguard also lowered fees on four other shares classes of the Total Bond Market Index Fund in addition to BND. BND is now less expensive than 94 percent of rival funds. (See also: BND: Vanguard Total Bond Market ETF.)