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Once again, Vanguard is lowering the cost of investing. Effective February 1, 2025, the firm reduced expense ratios on 168 share classes across 87 funds. The expense ratio reductions are expected to save investors more than $350 million this year alone.1
Why investment costs matter
Vanguard Founder John C. Bogle explained why investment costs matter this way:
In investing, realize that you get what you don’t pay for. Whatever future returns the markets are generous enough to deliver, few investors will succeed in capturing 100% of those returns, simply because of the high costs of investing—all those commissions, management fees, investment expenses, yes, even taxes—so pare them to the bone.2
May 1 will mark Vanguard’s 50th anniversary. All along, we have emphasized the importance of limiting the cost of investing. Lower costs leave more money in investors’ funds and raise their potential returns. Indeed, across the industry, lower-cost funds have historically outperformed higher-cost funds on a net-of-expenses basis.3 Over 90% of Vanguard active fixed income funds and 88% of Vanguard equity funds outperformed their Lipper peer group averages over the past ten years.4
Lower-cost portfolios tend to outperform higher-cost ones
At Vanguard, we believe our funds’ impressive long-term performance owes much to their low costs. For the 10 years ended December 31, 2024, 84% of our funds outpaced the average results of competing funds. The performance of our actively managed fixed income funds has been especially strong: 91% of our active bond funds and 100% of our money market funds have outpaced their peers’ average results.5
Following our latest expense ratio reductions, Vanguard funds are less expensive than ever. Consider that:
- Overall, 86% of Vanguard mutual fund and ETF assets are in the lowest-cost deciles of their peer groups.6
- Our average expense ratio for index fixed income ETFs is only 0.037%.7
- Our active fixed income ETFs have an average expense ratio of 0.105%—the lowest among leading issuers of such ETFs.8
Vanguard expense ratio cuts, explained
Our lower fees are the estimated annual operating costs of the affected fund share classes, expressed as percentages of their average net assets. Also known as their expense ratios, the fees are detailed in the funds’ prospectuses. The prospectuses of all affected funds were updated today in filings with the Securities and Exchange Commission. The amended prospectuses are available on the Vanguard Investment Products List.
Operating costs generally are deducted from the income that mutual funds and exchange-traded funds earn on their holdings. Expense ratios may cover investment advisory fees, marketing and distribution expenses, brokerage fees, and custodial, transfer agency, legal, and accounting fees.
Source: Vanguard