Vanguard's average fee is now 0.07% after biggest-ever cut
bloomberg.com
bloomberg.com
Fidelity used to be known for actively managed funds, but has been eating Vanguard's indexing lunch for the past 10 years or so. Part of this relates to its dominance in workplace accounts, but Vanguard hasn't helped itself with some bad customer-facing software updates and a perception that its service levels are poor compared to Fidelity.
Cutting fees helps, but Fidelity has shown its willing to do this, too, including no fee "Zero" index funds: https://www.fidelity.com/mutual-funds/investing-ideas/index-... (note Fidelity is very clear about who it's competing with)
Do you mean that you sold mutual funds at Vanguard, and used the cash to buy ETFs at eTrade? This means you had to pay tax on capital gains, right? Or is there some trick I don't know about, vis-a-vis converting mutual funds into equivalent ETFs, without a taxable event?
But not all of the funds have an ETF share class. And if you hold Vanguard mutual funds elsewhere, you'd need to transfer them in-kind to Vanguard to convert.
Might be manageable if you're purchasing in enormous quantities; but a 5% fee on $1000 hurts if you're in normal consumer purchase ranges.
The real main advantage of funds vs ETFs is they don't bounce around in price every millisecond.
Of course, I'm a 'buy and hold' investor so this doesn't really effect me much, but it's the principle of the matter.
I consider most financial institutions to be criminal because it is always their clear intention to circumvent the spirit of the law as closely as possible. The intention is to reap the benefits of breaking the law, without the risk of consequence. When the pitchforks come, these are going to be the criminals being chased down the street.
By the same token, I do not consider a parent who writes a bad check for groceries to be a criminal.
What in particular do you see as against the spirit of the law?
If you have a legal route to $1M and an illegal route to $1.5M, the rational calculation for fines is against the $0.5M delta, not the full amount.
Citaldel paid handsomely for order-flow information from Robinhood. They made a lot of money off retail traders. They paid a fine IIRC equivalent to a few day's profits.
If you are curious about a brokers position on PFOF you can look up their disclosures. SEC Rule 605, 606 and 615 are the search terms you want when looking these up. Fidelity has a similar disclosure on this as Vsnguard, which is that they don’t engage in PFOF except for some options markets.
Robinhood got in trouble for false advertising about PFOF not because they engaged in it, because again, PFOF is not front running and not illegal.
While the studies on how PFOF effects execution quality are varied, this summary [1] from Wharton seems fairly balanced. It's not as simple as citing NBBO and moving on.
Personally I'm suspicious of the practice mostly because of the pretty clear conflicts of interest that it creates. Again, this is controversial, but the people arguing it's ok are for the most part making money from it.
[1] https://wifpr.wharton.upenn.edu/uncategorized/research-spotl...
Edit: No, it's not in the US at least. It mostly just allows the broker to internalize orders if they prefer.
But you can't front run shares of mutual funds; they always trade at close of business at NAV.
You could potentially front run ETFs, but if you're worried about that, you can use limit orders and get the price you want or not transact. As long as you use a competent broker that offers limit orders.
> A form of front-running in index funds is common and isn't illegal.
> Index funds track a financial index by mirroring the index's portfolio. The composition of the index changes periodically to balance it accurately as the stocks that make it up change dramatically in price or as stocks are added or removed from the index. That forces the fund's managers to buy or sell some components of the index.
Otherwise, I wouldn't call those things front running, as there's no indication of imminent activity.
If a material increase in lending rates on a heavily shorted stock was announced, and you bought because you were pretty sure the shorts would be buying to close, that could be front running, yeah.
I dunno about market moves based on Elon's role in the culture wars, but maybe if he did something in particular.
In general, buy on the rumor, sell on the news could qualify as front running under this definition, but I think I'd want to narrow it a bit to working to trade ahead of perceived imminent and definite trades. Most of the illegal front running is trading ahead of specific trades in response to seeing those orders.
Any evidence this is actually happening, rather than something like "this ETF rebalances every quarter, they're unbalanced, and are expected to rebalance in this way", or "this company is probably going to get included in the S&P 500 because it's doing really well"? What makes this sort of "front running" less acceptable than buying because "I like the stock", or trading on technical analysis?
https://www.sec.gov/newsroom/press-releases/2021-118
https://www.sec.gov/newsroom/press-releases/2021-186
https://www.sec.gov/newsroom/press-releases/2022-228
Trading ahead of index funds when an index change is announced is front running in my book, but it isn't illegal front running; but I don't consider it less acceptable than buying because the graph makes a funny shape.
>https://www.sec.gov/newsroom/press-releases/2021-118
>Wygovsky repeatedly traded in his family members’ accounts held at brokerage firms in the United States ahead of large trades that were executed on the same days in the accounts of his employer’s advisory clients.
>https://www.sec.gov/newsroom/press-releases/2021-186
>Polevikov had access to real-time, non-public information about the size and timing of his employers' securities orders and trades, and used that information to secretly trade on, and ahead of, his employers' trades.
>https://www.sec.gov/newsroom/press-releases/2022-228
>Billimek would inform Williams of the asset management firm’s market-moving trades prior to their execution
I never said trading a stock ahead of it being added or removed to the S&P 500, or between the announcement of it being added or removed and index funds actually purchasing it is illegal, immoral, or unfair, or less acceptable than any other trade.
Just that it's front running. And then you asked if there were examples of illegal front running, so I provided those --- which aren't examples of trading ahead of index funds, because trading ahead of index funds isn't illegal.
I'm not really sure what you're asking at this point.
I put the word in quotes, because this is a perfectly legitimate way of front running. The major indices are all public, and anyone can take a crack at this. In other words, if I announce to the world a month in advance that on a specific day and a very specific time of the day (at the closing auction) I'm going to buy X amount of specific stocks and sell Y amount in other stocks, I can't blame people for using that information against me.
> Basically every index of any significance is already being monitored and rebalancing effects are "front-run" this way.
> I put the word in quotes, because this is a perfectly legitimate way of front running.
No; it is not "front running."
as a "consumer" of the mutual fund, you can't.
but the mutual fund itself makes large trades: somebody downstream executing those trades or having access to that data could front run.
Vanguard is more and more becoming a group that just wants to run ETFs and if you want to use them, they're making it harder and harder. They recently dumped all their 401(k) and similar plans from being in-house to some other provider.
Saves costs, makes support annoying.
Of course, you can use a Fidelity account to own Vanguard ETFs if you wanted.
Which I would highly recommend if you ever want to change brokers. the fidelity ZERO products are great but can only be held at fidelity while VOO shares can be transfered to any broker.
I sold and bought recently (because transfer looked like paperwork hassle to me): had a small transaction cost, and the main disbenefit was losing transaction history e.g. buy date was now reset; it was tax neutral for me either way.
> Vanguard is more and more becoming a group that just wants to run ETFs and if you want to use them, they're making it harder and harder. They recently dumped all their 401(k) and similar plans from being in-house to some other provider.
If this is true, then it must for individuals.. My company moved a little over a year ago TO vanguard for 401ks
https://www.ascensus.com/about-us/press-room/news/ascensus-t...
This post was a reminder to get those moved out of Ascensus into Fidelity if possible.
Horrible move on their part, if I didn't want some provider diversification I'd just move everything over entirely at this point.
Funny business can absolutely be pulled during rebalancing.
Another big one is securities lending income. Vanguard pays that out to investors which effectively creates negative expense ratios in certain funds. Index funds from other issuers don’t necessarily share that securities lending income with customers.
As a practical matter, since dealing in mutual funds' shares is settled after market, "front running" these transactions would be problematic. (Impossible, I'd say?)
[0] https://www.fidelity.com/trading/execution-quality/overview
“Vanguard set out in 1975 under a radical ownership structure. Our company is owned by its funds, which in turn are owned by Vanguard’s fund shareholders. We focus on meeting the investment needs of our clients.”
So in short, vanguard is customer-owned, where fidelity is owned by mostly the founding family (the Johnson’s).
https://corporate.vanguard.com/content/corporatesite/us/en/c...
Funds aren't known for being voting activists.
In the case of an investment fund, there's really just customer service and rate of return. If I have a good experience in those dimensions, why should I be concerned with ownership structure?
If you are not Cxx level at a company or at least in a high role with a reasonable shot of getting to a Cxx position in the near future don't put your money in the company you work for. Diversity is important in investing and the company you work for is the least diverse of all investment options since you could lose both your savings and your paycheck at the same time.
https://corporate.vanguard.com/content/corporatesite/us/en/c...
1. Executives
2. Large shareholders (usually institutional and rarely individuals)
3. Customers
4. Employee unions (if present)
The tech industry is an anomaly where 1 and 2 largely overlap, but this is not true in most industries. Unless you are super rich, you will never be able to have more influence over a large company than you do in the role of a pissed off customer ready to take his money elsewhere.
Pays out once in Dec. If you buy in Feb and sell in Oct, you're not getting your dividend although you earned most of it... If you had VTI, you'd get 3 of them.
This literally happened to me. I'm banned from Fidelity for some unknown (AML presumably) reason but have no other issues with any brokerage, bank, or exchange.
Fortunately I just held a bunch of ETFs, so it was straightforward. But it does happen.
Fidelity’s technology and customer service does generally seem better. Although they were completely baffled when their app refused to run on a rooted phone with an error message along the lines of “your account is frozen” after I logged in. (It wasn’t, and worked fine after I realized that was the issue and put it on the deny list.)
Overall, I trust Vanguard more, but both have their strong points.
Vanguard has so much friction on what should be very simple and common tasks.
There's no excuse for that. I can say pretty confidently that cutting fees won't be enough. They need a total rewrite of all their customer facing software and web stuff, and they probably need to revamp their customers service as well. They screwed up my wife's name and she tried for months and months to fix it before giving up.
For 1, all of us software people have seen companies do this over and over, and it always sucks. For 2, why they couldn't do whatever backend migration they needed to do without having it disrupting retail customers, I have no idea.
Both of those point to a software organization way below where it needs to be competence-wise.
They've done that. And now you can't sort by capital gain/loss per share when picking lots to sell.
They're also almost done forcing everyone into the brokerage side, which is less flexible with some things like reinvestment of dividends. On the nice side, it includes foreign dividend info on the 1099s so you don't have to find a separate document to get those percentages.
It took me MONTHS to figure out how to sell a particular fund to buy another one. Somehow every time I tried to do it, it failed. I kept coming back to it over and over and different things went wrong. It was also very difficult to figure out the status of an order.
It was literally that clunky, and I've been trading for decades. I run multiple businesses, I know how these things work, but their UI was awful.
I just kept checking it once in a while when i had a few seconds to spare.
But it's still bad.
Even if the thing that you're using for really, really shouldn't be a radio button.
This is an example of not breaking what was not broken (or at least, keep most of what was useful instead of replacing everything with "new and cool" stuff just because <no reason?>).
Bookmark https://holdings.web.vanguard.com/
Also, sometimes the lending revenue is just added to the fund, rather than being used to offset expenses. The end result is the same, but the accounting numbers look different.
As a result, when comparing two index funds that track the same index, you should look at actual total returns rather than quoted expense ratios.
The downside, as I understand it, is that Fidelity Zero doesn’t offer ETFs, and that the Fidelity Zero mutual funds can’t be transferred to other brokerages. Depending on your preferences their expense ratios might justify the vendor lock-in, but Vanguard ETFs are hard to beat IMO.
If I were to ever need to move the HSA money elsewhere, they can sell the funds to transfer, since it's not a taxable event, that's fine by me.
I won't buy the zero funds for my brokerage account though, I stick with Vanguard ETFs.
In taxable it could cause you to have to stay with Fidelity or eat a tax bill.
everyone can vote with their wallet
Other brokerages are better at their niche but the fidelity package is quite competitive
The app is clunky, slow, and looks like something from the 90s. Just logging in takes an average of 10-15 seconds. The credit card is serviced by Elan, who is awful, but aside from that, the UX is abysmal. It feels like it redirects no less than 8 times to get to the credit card page. My phone won't even load it, so I have to do it on my computer.
It's so frustrating to me because I feel like they're 90% of the way there and just need a bit of UX work. But I've had that feeling for years now, with no real progress made, so am slowly moving away. If you don't touch your money often, it's probably fine - great even, but it became too frustrating for me in the end as an everyday use account.
I have not had to interact with Elan customer service, so I can't speak to that. I also don't care about the Fidelity mobile app (I use fidelty.com from my laptop). I haven't had any issues using fidelty.com to manage the card.
[1] https://old.reddit.com/r/CreditCards/wiki/list_of_flat_cashb...
Bad UX is, intentionally or not, consistent with Vanguard's long-term index investing philosophy. Call us? Use our website? Whatever it is you are trying to do, you probably shouldn't be doing that.
I kid, but only a little.
The website isn't amazing, but I don't feel like it's terrible either. There's much worse 401k/IRA providers out there.
Vanguard will throw you into an automated labyrinth with the only exit being a poorly-trained rep in india or pakistan that has no real understanding of what you're trying to do.
Their website is complete trash compared to the other big two. Often down, you can only check your balance, etc.
Fidelity will within a matter of a couple of minutes connect you with someone that seems too good to be true. Knowledgeable, friendly, going out of their way to help you, they follow up on what they say (like calling you back, etc).
Once I got a taste of how Fidelity treats people and their broader set of products I moved everything over.
Vanguard is circling the drain if you ask me.
Were you on a plan run through an employer? Or individual?
The breakpoints are $50k, $500k, $1M, $5M.
I'm wondering if it's something where company-sponsored plans sometimes have bad CS support because their support contracts are paid/arranged separately from if you just have a personal account. Or if some company plans have better support because they pay for it?
However, if the fee structure is 0.07%, that's $70/year / 100k invested. Even if it's 0.44%, you're talking about $440.
The fees on most funds are small enough now to not matter much. It's worth shopping for lower-fee funds, but the more you go below 0.5%, the less it matters. If I save $500 per year for 50 years, that's $25k+interest, which is kind of the breakpoint of where it has practical impact on e.g. when I can retire.
When I did the math with my life savings, 0.5% was about the breakpoint where things become significant. $200k would be more significant, so I suspect when I did the math properly, I was expecting to retire in less than 50 years. In 50 years, I'll likely be dead.
I'm not storing my retirement funds in the latter.
[1]https://www.bogleheads.org/wiki/How_much_do_you_lose_to_annu...
[0] https://www.morningstar.com/business/insights/blog/funds/etf...
Vanguard also has things like the VIGAX (0.05%) and the VITAX (0.09%) with excellent returns over the past 20 years.
You could also actively invest, where you can get lucky, but if you have a day job... it gets tougher.
edit: also you could do "better" with lower fee funds, but they typically dont match the performance over the time period, and fidelity is a recent entry for their funds.
You have a 500k portfolio, and you spend the average amount week managing your portfolio (12 hours). If you were to achieve a 2% alpha (which is considered insanely high for any actively managed fund, and almost impossible to replicate year after year), you have made an excess $10k over what you would have made investing your portfolio in a benchmark.
On an hourly basis that's about $16 per hour spent... you could get more reliable income working at a gas station in California. And of course, most people are not investing $500k, the vast majority of day traders are probably pulling their hair out managing <$100k...
Not bad
Anyone know off the top of their heads which funds specifically? Thinking I need to move away from being so stock-heavy.
rule of journalism: never quote the original news/article source
rule of financial journalism: never list the ticker/wkn/isin that would make the article actually useful
- iShares Core (Blackrock) https://www.ishares.com/us/strategies/core-etfs
- SPDR Portfolio (State Street) https://www.ssga.com/us/en/individual/fund-finder
- Schwab Select (includes in-house and third-party) https://www.schwab.com/research/etfs/tools/select-list
Also, worldwide there are quite different preferences in which indexes to hold, so there is some variation.
[1] https://vanderwalt.de/blog/etf-vs-direct-indexing-investing-...
I probably have an informed opinion on the company I work for - but I don't have enough shares to matter. The other 499 I know nothing about.
Not sure I follow how voting rights goes against the point of tracking an index? I'd say the value of the index implicitly prices in the value of the voting rights in the constituents. So if your index does not contain the voting rights, should the index price not be different?
> And for funds that use synthetic replication there is nothing to vote on in the first place.
There are all kinds of funds, of course when it's 100% synthetic then so be it. But if it holds a representitive sample of Russell 3000, then those votes count.
What? Both are 0.03% ER funds.
A small investor is so agile - they can move in and out of positions. Why that agility can't be utilized to outperform a slow moving index fund, long-term?
And you're also saying investor, not trader. So moving in and out quickly doesn't matter as much if we're talking about mid to long term holds.
It also makes sense that those with the largest edge in decision making for trades would collect most of the money.
So it should not at all be surprising that index funds perform better than the average investor.
Furthermore, as far as agility is concerned, it doesn't play much of a role in the market. Almost all gains in the stock market over the course of a year come from a handful of days. For example in 2024, just 9 days account for the entire yearly gains.
You could stomach the 80% draw down?
What are the black swan events for those holdings - I assume they can get margin called?
I can certainly lose a lot of money, the fees are substantially higher than a regular ETF (about 4x higher), and the volatility and constant rebalancing on a daily basis results in a phenomenon known as volatility drag... and yet TQQQ and UPRO have been an absolute killer over the past 10 years.
In my non-tax free accounts I hold unleveraged ETFs: SPY and QQQ.
Except being more agile also means eating more fees.
Peter Lynch famously (he was then manager of the world's largest fund) got out of Gap when he noticed his daughters didn't buy anything there for school and that was his clue that they wouldn't do well next quarter. Gap as had ups and downs since. This is the type of research you will be doing all the time, trying to find a evidence of a company that will disappoint before anyone else knows. This is hard hard hard, and is always a matter of luck. Remember by the time it is public the large players already know and have acted (that is they get alerts the instant it becomes public and are first in line to act on it, technically you get the information at the same time and can act as fast but in practice you will not)
If the basic hypothesis is that “don’t bet against the U.S.” and that the U.S. long term, always go up, and I’m assuming most of us buy in to this hypothesis because most of us are probably holding an index fund for the S&P or QQQQ long term..
Looking at my portfolio, I just weathered the 2022-2023 storm without even looking. It could have been down 50%, it could have been 90%, I wasn’t selling. I’m all in for another 20 years.
Given that stance, why wouldn’t I just buy and hold a leveraged asset like TQQQ?
The Vanguard UI / UX is absolutely terrible. Opening the website instantly transports me to 2002.
Its just sad that time and time again HN of all placed refuses to even consider that, yes magical p2p internet money does indeed have its uses outside of illegal activities.
Their business is doing so well that they can lower fees.
The counter to that is that they are not doing so well, that they need to attract more investors.
At over $10 trillion AUM, it's hard to think that they're "not doing so well".
My assumption is that the corporate leaders go for a dip in the McDuck money pond every year, and when the level is too high that it risks overflowing, they adjust the fees down.
I've been long on crypto since 2013, I'm not a crypto day trader, and I'm well aware of DeFi. I consider that an investment, not speculation.
Let people treat things the way they want to. All of the people who want to stick with Vanguard and their position are free to do so.
https://www.cnbc.com/2025/01/17/vanguard-fined-more-than-100...
https://asic.gov.au/about-asic/news-centre/find-a-media-rele...
https://www.reuters.com/business/finance/vanguard-fined-prov...
However, to the extent that those things are bad, they are much less bad than my trust in myself to securely manage a crypto wallet key.
If there was some magic thing that just automatically worked and I could somehow trust it, I would be all in. That's not the case for any cryptocurrency I know of because you need to A) maintain access to your wallet key and B) prevent other people from getting it and C) don't inadvertantly click any of those links that drain your account that I've heard of (I don't understand the details)
If you can put in the research and discipline to satisfy those requirements, I'm certainly not going to try to talk you out of it, but they're way to steep for us normies.
Just because the UX sucks today, doesn't mean the fundamental underlying technology isn't something worth building on.
By the way, if you think crypto UX is hard, try trading options with thinkorswim.
You've misunderstood me. I have no interest in shitty UX. A competition for the shittiest UX is like the lowest high jump. You want a shitty UX? I can get you one by 4:30, with nail polish. The fact that extremely confusing UX is easy to find in no way mitigates a merely very confusing UX.
I kind of agree with you though. Cryptocurrency is kind of a neat idea. Shame about the actual manifestation though. I'm not opposed on principle. If anyone ever figures out how to make it good, I'll check it out. But in the first 15 years, nothing reasonable has emerged. I don't have much hope for the next 15 years either.
Maybe someone will figure it out, but I don't think that's actually going to happen. So I don't think investments in cryptocurrency research or whatever is a good idea.
I actually wonder if you've tried it... it really is just put in an address, amount (of any size), and click send.
Want to earn interest or borrow funds? Load up Morpho.org, deposit into a vault of your liking and borrow whatever you want. No need to ask anyone for permission and fully decentralized. Even the source code is public and audited. Don't trust it? There's nearly $6B in there and Coinbase built a whole product around it. It couldn't be all bad.
I think things have progressed quite a lot in the last few years. Take a look, you might be surprised.
The UX for some of my banks are way worse. For example, the limits on transfer sizes are obtuse. 25k limit? WTF, it is my money, let me move it around how I wish, I'm not a criminal.
I guess a bank could just steal money from my account, but I believe they won't, and furthermore that there will be something left for me to take legal action against if they try. The scary regulation helps me.
I have no idea who the players are in cryptocurrency accounts, but I have no confidence that they are going to continue to exist from one day to the next. And then if I try to host my own wallet or whatever, I don't have nearly the operational discipline and security for that to work.
I don't even know if it's possible to solve this for me.
I looked at morpho.org and I don't understand what it is. I don't know what a vault is.
Lots of wallet options now and they've gotten pretty advanced. Coinbase Wallet [0] is fully self custody and has anti-phishing, security and backup features built into it. You don't need to host anything. Backed by a public company that's been in business for a decade.
Start small. A few hundred $'s worth of crypto, something you're not afraid to lose. Then, no need to worry. It isn't like anyone starts riding a bike at 100mph.
Banks do fail, sure you can get FDIC, but as we saw with the fairly recent SVB debacle, it can have a real impact until it kicks in. I wouldn't count on being able to sue someone, when they've taken all your funds and you're just trying to figure out how to live.
Much like everything in life, all of this is really just a matter of having an interest or need to try new things out. That's what blows my mind about HN negativity. We are supposed to be curious technology people, but instead it is full of downvotes and an instant negative reaction. Never about, "I tried it and I found out that I didn't like it for XYZ reason."
[0] https://investor.vanguard.com/investment-products/mutual-fun...
For instance, Vanguard is one of the largest institutional investors in MSTR and MARA.