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Fund expense changes reported in April

April 30, 2014

In recent weeks, a number of Vanguard funds have issued revised prospectuses. Typically, when this occurs, some funds' expense ratios—essentially, operating costs that are passed on to investors—go up or down, while other funds report no changes.

The funds issuing revised prospectuses in April 2014 are listed in the table below this article.

View all Vanguard mutual fund prospectuses  |  View all Vanguard ETF prospectuses


The less you pay to invest, the more you keep in your pocket. It's that simple.

Since our founding nearly 40 years ago, Vanguard has focused on keeping operating costs low. As a client, you pay us only what it costs us to run the Vanguard mutual funds—period. That's why, on average, other companies' mutual funds are 5 times more expensive than ours.*

Because your investment costs have a major effect on your net returns (here's why), we believe it's important for you to pay close attention to them. Seemingly minor differences in expense ratios can add up significantly over time. (Expense ratios are the portion of a mutual fund's operating expenses passed on to shareholders, shown as a percentage of the fund's total assets.)

The nuts and bolts of fund expenses

In 2013, the average expense ratio of Vanguard mutual funds was 0.19%, far lower than the industry average of 1.08% (source: Lipper, a Thomson Reuters company).

Here's what those numbers mean in a nutshell: Each percentage point in an expense ratio represents an annual charge of $100 against every $10,000 you invest in that fund. In other words, if you have $10,000 in a hypothetical fund with a 0.50% expense ratio, you're charged $50 each year. So, a 0.15% expense reduction would save you $15, while a 0.15% increase would cost you an extra $15.

The chart below shows how strongly costs can affect your savings over the long term. In one scenario, represented by the red line, the investor pays 0.25% every year. In the other, represented by the orange line, she pays 0.90%. (A "no cost" scenario is shown for comparison's sake.) After three decades, the lower-cost investor comes out ahead by nearly $100,000:

The long-term impact of investment costs
Assuming a starting balance of $100,000 and a yearly return of 6%, which is reinvested

The long-term impact of investment costs

Note: This illustration depicts the impact of expenses over a 30-year period. The hypothetical portfolio has a starting value of $100,000 and grows by an average of 6% annually. The portfolio balances shown are hypothetical and do not reflect any particular investment. The final account balances do not reflect any taxes or penalties that might be due upon distribution. Costs are one factor impacting total returns. There may be other material differences between products that must be considered prior to investing. Source: Vanguard.

Why do expense ratios change from time to time? Market activity can be a big factor. Expenses can go up or down in response to changes in a fund's assets and/or changes in the cost of managing it. For example, strong performance could lead to economies of scale that result in a cost reduction, while shrinking assets could force expenses to go up.

Another factor: When Vanguard hires an outside advisory firm to help manage a fund, the contract usually includes performance-based bonuses and penalties. If the fund's performance exceeds that of a particular benchmark, the advisor's compensation increases. If performance falls short, the advisor's compensation declines. This approach, naturally, helps us make sure the interests of our advisory firms are in sync with our funds' shareholders.

How Vanguard is different

Unlike many other fund companies, Vanguard doesn't generate profits for private owners. Instead, our unique corporate structure—along with our relentless efforts to keep costs low—has resulted in savings that let our clients keep more of their returns.

Although we're firmly committed to reducing costs, we don't do so simply for the sake of appearances. Vanguard's history of low costs is rooted in our corporate philosophy—it's not a marketing gimmick. And while we believe investment costs should be an important part of your decision-making process, a change in a fund's expense ratio (whether up or down) shouldn't necessarily be the only reason you buy or sell shares.

You also need to consider your personal financial goals, your time frame, and your tolerance for bearing the risks of investing. And don't overlook the potential tax implications of your decisions, as taxes can be viewed as another cost of investing, and can impact your net returns.

Also, think carefully before basing any investment decision on performance. Buying a fund solely because it's done well in the past, or selling a fund that has performed poorly, can turn into a costly mistake—a mistake that may outweigh the considerable benefits of a low expense ratio.

*Based on 2013 U.S. mutual fund industry average expense ratio of 1.08% and Vanguard's average expense ratio of 0.19%. Source: Lipper, a Thomson Reuters Company.


Vanguard funds issuing revised prospectuses in April 2014

View all Vanguard mutual fund prospectuses  |  View all Vanguard ETF prospectuses

Vanguard fund Share class Former
expense ratio
Current
expense ratio*
Effective date
500 Index Fund Admiral™ 0.05% 0.05% 04/28/2014
500 Index Fund ETF 0.05% 0.05% 04/28/2014
500 Index Fund Investor 0.17% 0.17% 04/28/2014
500 Index Fund Signal® 0.05% 0.05% 04/28/2014
Developed Markets Index Fund Admiral 0.10%    0.09% Arrow 04/07/2014
Developed Markets Index Fund Investor 0.20% 0.20% 04/07/2014
Extended Market Index Fund Admiral 0.14%    0.10% Arrow 04/28/2014
Extended Market Index Fund ETF 0.14%    0.10% Arrow 04/28/2014
Extended Market Index Fund Investor 0.28%    0.24% Arrow 04/28/2014
Extended Market Index Fund Signal 0.14%    0.10% Arrow 04/28/2014
FTSE Developed Markets ETF ETF 0.10%    0.09% Arrow 04/07/2014
Growth Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Growth Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Growth Index Fund Investor 0.24% 0.24% 04/28/2014
Growth Index Fund Signal 0.10%    0.09% Arrow 04/28/2014
Inflation-Protected Securities Fund Admiral 0.10% 0.10% 04/29/2014
Inflation-Protected Securities Fund Investor 0.20% 0.20% 04/29/2014
Intermediate-Term Bond Index Fund Admiral 0.10% 0.10% 04/29/2014
Intermediate-Term Bond Index Fund ETF 0.10% 0.10% 04/29/2014
Intermediate-Term Bond Index Fund Investor 0.20% 0.20% 04/29/2014
Intermediate-Term Bond Index Fund Signal 0.10% 0.10% 04/29/2014
Large-Cap Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Large-Cap Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Large-Cap Index Fund Investor 0.24% 0.24% 04/28/2014
Large-Cap Index Fund Signal 0.10%    0.09% Arrow 04/28/2014
Long-Term Bond Index Fund ETF 0.10% 0.10% 04/29/2014
Long-Term Bond Index Fund Investor 0.20% 0.20% 04/29/2014
Market Neutral Fund Investor 1.90%    1.60% Arrow 04/25/2014
Mid-Cap Growth Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Mid-Cap Growth Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Mid-Cap Growth Index Fund Investor 0.24% 0.24% 04/28/2014
Mid-Cap Index Fund Admrial 0.10%    0.09% Arrow 04/28/2014
Mid-Cap Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Mid-Cap Index Fund Investor 0.24% 0.24% 04/28/2014
Mid-Cap Index Fund Signal 0.10%    0.09% Arrow 04/28/2014
Mid-Cap Value Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Mid-Cap Value Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Mid-Cap Value Index Fund Investor 0.24% 0.24% 04/28/2014
Short-Term Bond Index Fund Admiral 0.10% 0.10% 04/29/2014
Short-Term Bond Index Fund ETF 0.10% 0.10% 04/29/2014
Short-Term Bond Index Fund Investor 0.20% 0.20% 04/29/2014
Short-Term Bond Index Fund Signal 0.10% 0.10% 04/29/2014
Small-Cap Growth Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Small-Cap Growth Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Small-Cap Growth Index Fund Investor 0.24% 0.24% 04/28/2014
Small-Cap Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Small-Cap Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Small-Cap Index Fund Investor 0.24% 0.24% 04/28/2014
Small-Cap Index Fund Signal 0.10%    0.09% Arrow 04/28/2014
Small-Cap Value Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Small-Cap Value Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Small-Cap Value Index Fund Investor 0.24% 0.24% 04/28/2014
Tax-Managed Balanced Fund Admiral 0.12% 0.12% 04/07/2014
Tax-Managed Capital Appreciation Fund Admiral 0.12% 0.12% 04/07/2014
Tax-Managed Growth and Income Fund Admiral 0.12% 0.12% 04/07/2014
Tax-Managed Small-Cap Fund Admiral 0.14%    0.12% Arrow 04/07/2014
Total Bond Market Index Fund Admiral 0.10%    0.08% Arrow 04/29/2014
Total Bond Market Index Fund ETF 0.10%    0.08% Arrow 04/29/2014
Total Bond Market Index Fund Investor 0.20% 0.20% 04/29/2014
Total Bond Market Index Fund Signal 0.10%    0.08% Arrow 04/29/2014
Total Bond Market II Index Fund Investor 0.12% 0.12% 04/29/2014
Total Stock Market Index Fund Admiral 0.05% 0.05% 04/28/2014
Total Stock Market Index Fund ETF 0.05% 0.05% 04/28/2014
Total Stock Market Index Fund Investor 0.17% 0.17% 04/28/2014
Total Stock Market Index Fund Signal 0.05% 0.05% 04/28/2014
U.S. Growth Fund Admiral 0.31% 0.31% 04/22/2014
U.S. Growth Fund Investor 0.45% 0.45% 04/22/2014
Value Index Fund Admiral 0.10%    0.09% Arrow 04/28/2014
Value Index Fund ETF 0.10%    0.09% Arrow 04/28/2014
Value Index Fund Investor 0.24% 0.24% 04/28/2014
Value Index Fund Signal 0.10%    0.09% Arrow 04/28/2014
VVIF Balanced Portfolio 0.26%    0.27% Arrow 04/30/2014
VVIF Capital Growth Portfolio 0.41% 0.41% 04/30/2014
VVIF Conservative Allocation Portfolio 0.20%    0.19% Arrow 04/30/2014
VVIF Diversified Value Portfolio 0.35% 0.35% 04/30/2014
VVIF Equity Income Portfolio 0.33%    0.32% Arrow 04/30/2013
VVIF Equity Index Portfolio 0.17%    0.16% Arrow 04/30/2014
VVIF Growth Portfolio 0.41% 0.41% 04/30/2013
VVIF High-Yield Bond Portfolio 0.29% 0.29% 04/30/2014
VVIF International Portfolio 0.49%   0.47% Arrow 04/30/2014
VVIF Mid-Cap Index Portfolio 0.26%   0.25% Arrow 04/30/2014
VVIF Moderate Allocation Portfolio 0.20%   0.19% Arrow 04/30/2014
VVIF Money Market Portfolio 0.16% 0.16% 04/30/2014
VVIF REIT Index Portfolio 0.28%   0.27% Arrow 04/30/2014
VVIF Short-Term Investment Grade Portfolio 0.20% 0.20% 04/30/2014
VVIF Small Company Growth Portfolio 0.44%    0.41% Arrow 04/30/2014
VVIF Total Bond Market Index Portfolio 0.20%    0.19% Arrow 04/30/2014
VVIF Total Stock Market Index Portfolio 0.18% 0.18% 04/30/2014

*As of the fund's most recent prospectus.

Notes:

  • All investing is subject to risk, including the possible loss of the money you invest.
  • Vanguard ETF Shares are not redeemable with the issuing Fund other than in Creation Unit aggregations. Instead, investors must buy or sell Vanguard ETF Shares in the secondary market with the assistance of a stockbroker. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.
  • An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although a money market fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in such a fund.
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