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Vanguard - Are Low Fees A Myth?

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Hi All,


First let me preface the following statement with the following statement - I like Vanguard a lot and believe them to be one of the top companies in the world to invest with.....Ok, having said that...


The 403(b) product Vanguard offers isn't always the cheapest product around, in fact many times it can be quite spendy and limited. The Vanguard 403(b) limits you to 5 fund options - which is not a huge deal, but I prefer a little more diversification if I can get it. They charge $15 per year per fund regardless of account balance, in addition, they charge $10 a year for each index fund that is under $10,000. For beginning investors who are tyring to get well diversified Vanguard can be a little spendy. Does this mean I don't endorse Vanguard - no. I still endorse Vanguard but may not make it my first choice in all situations. If I were a new investor in Vanguard I would probably choose a lifestyle fund (or Vanguard STAR), thus limiting the additional layers of fees. I am not knocking Vanguard - simply pointing out some of the fees that they are charging that most people aren't aware of.


I understand why they are charging the extra fees - 403(b) is not an easy world to make money in. I still love Vanguard and still recommend them to client, but please keep in mind that Vanguard charges fees as well.


For Newbies, Vanguard is still a great place - just limit your fund selection to a lifestyle fund. For people with larger account balances be aware that it is a little more difficult to get really well diversified - but still very possible and it is hard to find others with as low fees - only TIAA is as competitive.


Hope all is well with everyone. We have a big story brewing that should be posted in a week or so- keep tuned in!


Warm regards,



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Guest JD


I have thought about these fees as well, as I am in 3 funds in vanguard in my 403 b


Total stck market index

Equity and income fund

international index


My cost for fees is $45 a year for these funds, wichh is annoying. I guess I figured that it is worth it for the low fees and diversification over the long run. Also, the alternative was valic and i did not like that at all. Anyway, you said that the rationale for vangaurd is the expense of it for them. What do you mean this is not an easy world to make money in. What is the extra expense for Vanguard?




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Scotty, I am a bit confused by your post. I use Vanguard for my 403b, I don't have the limitations that you speak of. I have access to all of Vanguard's mutual funds. Also, I don't pay the $15 fee.


Now, the reason I don't pay the fee is probably because I am a Voyager client. Also, I don't go to Vanguard directly. I don't have Vanguard available through my district so I have been transferring my 403b funds to Vanguard for a number of years. It appears that not all 403b plans are equal at Vanguard.


You are certainly correct in pointing out that if a person is not careful, one can pay too much in fees. However, the cost at Vanguard are still way below the average for mutual fund companies. Best Wishes.



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