11 Basis Points. Not one percent. Not one half a percent. Not even one quarter of a percent.
0.11%. That’s the new expense ratio on the Vanguard Bond ETFs. These were announced this week on the Vanguard RSS Feed.
$11 for every $10,000 you have invested. Combined with the 9 basis points you pay on the Total Stock Market ETF, you could have a 50/50 balanced portfolio for the total cost of 0.10% every year.
I know that things like this don’t excite everyone, but I see this as more than just a good deal. I see empowerment for everyone. People forget that 30 years ago, you couldn’t get index funds unless you were a large institution with millions to invest. Even then, you couldn’t get one with an expense ratio under 0.5% until 15 years ago. And getting one freely, with no fees save commission, like this, with no minimum investment? Forget about it, until now.
Now the small investor, with just a few thousand saved, can have access to the tools previously limited to massive institutions. And it seems to only be getting better every year.
From the Vanguard website:
Vanguard has filed a registration statement with the U.S. Securities & Exchange Commission (SEC) to offer exchange-traded shares for four existing Vanguard® bond index funds: Total Bond Market Index Fund, Short-Term Bond Index Fund, Intermediate-Term Bond Index Fund, and Long-Term Bond Index Fund.
Pending SEC approval, the four new bond ETFs will provide broadly diversified exposure to the entire U.S. bond market as well as discrete segments of the market at an expected expense ratio of only 0.11%.
Vanguard ETFs™ are uniquely structured as separate share classes of existing Vanguard mutual funds. For example, Vanguard Total Bond Market ETF will be a separate share class of the $40 billion Total Bond Market Index Fund, the industry’s first bond index fund and one of the largest bond mutual funds in the country. Introduced in 1986, the fund seeks to track the performance of the market-weighted Lehman Brothers Aggregate Bond Index, and holds nearly 2,800 corporate, Treasury, agency, and mortgage securities.
The new ETFs will be managed by the Vanguard Fixed Income Group, which oversees $310 billion in fund assets, including $65 billion in bond index fund assets.