33 responses

  1. Jeffrey Trull
    September 6, 2011

    Those are some crazy fees! Interesting to see how they perform against the S&P, too. Everyone needs to be careful with the fees out there. There are plenty of funds that don’t have such high fees that still perform well, as you point out.

    • moneycone
      September 9, 2011

      The expense ratios for these Vanguard funds are still less than what others charge for similar funds.

  2. DIY Investor
    September 6, 2011

    It shows me that it always pays to check fund fees. Funds that require a lot of manpower are going to be relatively expensive no matter who manages them. The market neutral fund requires identifying stocks to short as well as to go long – a lot of expertise!

    • moneycone
      September 9, 2011

      True DIY. It isn’t easy to achieve beta neutrality.

  3. Everyday Tips
    September 6, 2011

    The amount you listed for fees is insane. However, if you chose option 3 or 5 you would still be doing ok. I am sure I would have chosen option 2 though just because of Murphy’s law.

    I always look at expense fees before investing in a mutual fund but I should follow up on it more closely as that is a variable that can change. I do like morningstar.com for the purpose of evaluating fees.

    Great post!

    • moneycone
      September 9, 2011

      I don’t know how well a fund might perform in 10 years; the best I can do is keep costs low. Fine Bogle wisdom!

  4. Suba
    September 6, 2011

    Interesting to see them stacked against the S&P 500. I think our costliest holding is 0.27% We are evaluating to let Finance engine manage my husband’s portfolio, that would be free for the first 6 months, but would add .30% on top. So we will probably see how they do in the first 6 months and then decide.

    • moneycone
      September 9, 2011

      That is a good strategy Suba! Try before you buy!

  5. krantcents
    September 6, 2011

    I am a big Vanguard fund fan, but I have not used these funds. It will be interesting how these track for a few years.

    • moneycone
      September 9, 2011

      I would steer clear of exotic funds even if they are from Vanguard.

  6. Untemplater
    September 6, 2011

    Wow do those fees add up fast! That bites #3 has a redemption fee but at least the performance is well above the S&P. -Sydney

    • moneycone
      September 9, 2011

      I hate those fees!

  7. Squirrelers
    September 7, 2011

    Index funds are no longer vanilla. These days, there are plenty of new flavors being offered.

    Why? More profitable, one would think. For the firm, that is.

    The beauty of true index funds is that you can earn the market rate of return minus minimal expenses. Thus, you avoid the so-called trap of trying to beat the market. Most managed funds don’t beat the market.

    The non-vanilla index funds that include such fees sure do tap into the strong urge to beat the market. Being average sounds boring, right? I don’t know….I’m still in the camp of going for plain jane index funds with low fees.

    • moneycone
      September 9, 2011

      Index funds take emotion out of investing. That’s what I like about them.

      My money is not at the mercy of the whims of fund managers.

  8. The Biz of Life
    September 7, 2011

    When buying anything, it’s always buyer beware….. and do your homework. Like any fund company, Vanguard has some stinkers. Instead of VFSVX, buy the ETF VSS instead.

    • moneycone
      September 9, 2011

      If you get commission-free trading at your broker, nothing beats Vanguard ETFs!

  9. Hunter @ Financially Consumed
    September 7, 2011

    Those fees really are painful. It’s great to see these funds stacked against the S&P. But, fees are just one investment consideration. For at least 2/5 funds, the fees appear to be justified based on performance. I wonder, are the S&P returns on this chart inclusive of dividends? They often report S&P performance without considering dividends.

    • moneycone
      September 9, 2011

      In the chart above, dividends for S&P have been taken into account Hunter.

  10. SB @ One Cent At A Time
    September 7, 2011

    interested to see similar story on Fidelity funds as I have my funds invested through Fidelity only.

    • moneycone
      September 9, 2011

      I will keep your request in mind SB!

  11. retirebyforty
    September 7, 2011

    Those fee are pretty crazy. I would be interested in see a shorter timeline. I have VWO and it’s not doing so hot. I wonder if VMMSX is doing any better.

    • moneycone
      September 9, 2011

      10 year annualized return is 2.36% for VMMSX.

      • Matt
        February 22, 2013

        Yeah, but that’s not entirely true insofar as the fund has only been around since the middle of 2011. It has outperformed VWO in that time, and I say that as someone who recently sold off some of my stake in VWO for a stake in VMMSX. While I’m generally a fan of value investing and low fees in the form of index funds, there are certain investments where I’m open to the benefits of active management. Specifically with emerging markets where there’s such a wide range of options and such volatility, a manager can shift funds around much more strategically. Particularly with some of the BRIC countries slowing down a bit, I like having an active manager to take advantage of that volatility–while also taking advantage of the real emerging markets right now (Thailand, the Phillipines, etc.) that tend to be underrepresented in the index. If the fund underperforms I can always move on from it, but I think this is one of the few actively managed funds where there’s a greater chance of outperforming the index. The primary Vanguard funds that seem to be able to outperform the index are Windsor II, Equity Income, the Wellington, and the Wellesley funds. There are several others worth taking a look at too. Otherwise I’m all about low fee indexed funds. When people like Bogle and Buffet talk, your best bet is generally to take heed of what they have to say.

  12. The Dividend Ninja
    September 7, 2011

    I’m not one to endorse mutual funds, far from it! But if you really think those fees are “insane”, then you should come and live in Canada. The MER (managment expense ratio) for the average Canadian equity Mutual Fund is over 2.4%, plus the Trailer Fee, plus commissions – and that’s the low end of the scale. It’s no wonder Canadians are getting hosed by the mutual fund industry!

    • moneycone
      September 9, 2011

      Wow! That is steep, DN!

  13. Buck Inspire
    September 8, 2011

    I thought you were a Vanguard spokesperson pushing expensive funds. I saw what you did there. Nice job, expensive doesn’t mean the best!

    • moneycone
      September 9, 2011

      Don’t hold off on buying expensive funds just because of this post Buck! :)

  14. First Gen American
    September 9, 2011

    I love these kinds of analysis. Thanks for putting the time in to make the charts and also make the point that not all vanguard funds are cheap. They did a fantastic job at branding themselves as the low load guys and I’m glad you pointed out that this is not necessarily a fact for all their holdings.

    • moneycone
      September 9, 2011

      As always, read the fund prospectus. The fine print is more important than the ad pitch.

  15. Well Heeled Blog
    September 9, 2011

    I’ve been a Vanguard customer for a few years now – what I like is that once you get to a certain level, you qualify for the Admiral shares which are even lower in fees than their already-low-fee Investor shares. If I had a (much) bigger portfolio, I’d probably branch out into DFA funds and get some microcaps.

    • moneycone
      September 10, 2011

      If you qualify for Admiral shares, the fees are hard to beat.

      Though DFA funds are not normally available to individual investors, not many know this, but you can get access to DFA funds via Scottrade. Give them a call.

  16. The College Investor
    September 9, 2011

    After reading the post, I am no longer convinced that Vanguard is a low-cost fund.

    • moneycone
      September 10, 2011

      Most of Vanguard’s index funds have low ERs. These are actively managed (with the exception of VFSVX) of the exotic kind!

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