Vanguard Lowers Minimum for Index Fund Admiral Shares

Vanguard has announced that it is lowered the minimum required investment on the Admiral Shares of its index funds to $3,000, down from $10,000. Basically, if you owned the Investor Shares of one of their 38 index funds, you will own the cheaper Admiral Shares with no effort and no tax issues. You can perform this conversion manually if you don’t want to wait for them to do it for you. Good deal.

Alternatively, you may use this as an opportunity to spread your money across more funds due to this change. This would be bigger news, but a lot more people now own the ETF versions. I still remember in 2010 when Admiral Shares went from a $100,000 minimum investment down to $10,000. Note that this does not apply to Vanguard’s actively-managed funds, which are still at $50,000 for Admiral Shares.

In early November, Fidelity removed all investment minimums on their mutual funds. They also gave every investor in their funds the lowest expense ratio available in any share class, usually the ones for their institutional customers. For example, the Fidelity Inflation-Protected Bond Index Fund (FIPDX) now has an annual expense ratio of 0.05% with a $0 minimum investment, even lower than the Admiral Shares of Vanguard Inflation-Protected Securities Fund (VAIPX) at 0.10% which still requires a $50,000 minimum investment as it is an actively-managed fund.

I still have the majority of my investment portfolio held at Vanguard, but it appears that Fidelity has finally woken up from it’s “Let’s Pretend Index Funds Don’t Matter” slumber. (See Bloomberg interview.) Vanguard may deny it, but I think the current asset-chasing, expansion-minded Vanguard does respond to competition.

The trend continues. Anyone today can build a dirt-cheap index fund portfolio with Vanguard, Fidelity, Schwab, and iShares, and those portfolios keep getting cheaper and cheaper. The hard part will be sticking with your portfolio when you’re balances start shrinking.

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