Personal Investors

Learn more about mutual fund costs

Your mutual fund cost analysis looks at the expense ratios of the funds in your portfolio and compares them to Vanguard and industry averages. A fund's expense ratio is the percentage of the fund's assets that are used to pay the fund's operating costs. These costs are important because they represent dollar for dollar reductions in the fund's investment returns. Keeping costs low increases your potential return.

How we determine mutual fund costs

Your account group's expense ratio is calculated as a dollar-weighted expense ratio of the funds held. Vanguard's expense ratio is calculated as an "asset-weighted" expense ratio for Vanguard as a complex. This represents the expense ratio an "average Vanguard investor" pays. Shareholders may have their assets spread among various funds, so, overall, our asset-weighted expense ratio represents the expenses paid by the average Vanguard investor. For the industry as a whole, a simple average of funds supplied by Lipper Inc. is used.

Vanguard's expense and the industry expense ratio are calculated annually. Your savings is the difference between the industry average and their portfolio. Dollar figures are determined by simply multiplying the total fund balance by the expense ratio in question, so this assumes that there will be no change in the asset level, investment mix, or expense ratios over the course of the year. Annuities and 529 portfolios are not included in this analysis because they are not included in either the Vanguard or industry averages. If we don't have an expense ratio for a fund, then the fund is not included in this analysis, and it shows as "uncategorized."

For Vanguard funds and brokerage holdings, prices and shares used to compute your account value are as of the previous business day. For investments you entered in Outside Investments, prices may be from today's close, especially if you're viewing them after the market close, which is generally 4 p.m., Eastern time.

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