Not too long ago,
Vanguard eliminated the minimums for Signal class shares. This effectively means all 401K plans could in theory get a price break ... if the people in charge weren't more interested in ripping people off. For our plan, Employee Fiduciary just made the switch -- the change happened immediately after I emailed them the final go ahead. What took me some time was deciding whether to wait for Vanguard Intermediate Treasury Admiral (VFIUX) or go immediately with Vanguard Intermediate Government Bond Signal (VSIGX). From looking at the growth graphs, the 2 funds track each other pretty well.
From a quick glance, it seems like VFIUX at 0.12% ER is a slightly cheaper option than VSIGX at 0.15% ER. But then my mind starting pondering deeper. Vanguard does not arbitrarily set an expense ratio for funds. Instead, they report what last year's E/R was and it's just assumed that number will be in the same range in the future. So when Vanguard launched VSIGX just a short time ago, there was no "last year" to base the E/R numbers -- where did it come from?
First step was to look at the annual reports. Here are the numbers for Vanguard Intermediate Treasury:
Next for Vanguard Intermediate Government Bond Index:
From looking at 9 months, it appears the 0.15% is mostly an estimate based on previous fund launches. The actual expense ratio is unknown until Vanguard does another annual audit.
Can we project what it might look like after more net assets accumulate? (With Signal share minimums reduced to $0, the puny $3M in Signal should increase a lot.) To estimate costs, I dwelved into a lot of annual reports and compared funds with Investor/Admiral against those funds I compared funds with Investor/Admiral shares against those with just Signal/Institutional shares. The following table is a rough estimate of costs breakdown at higher asset values:
My educated guess is VSIGX will have about the same 0.12% E/R as VFIUX very soon if it isn't at that level already. For this reason, I decided to make the switch to VSIGX immediately in our 401K pan instead of waiting a few more months for VFIUX. Less confusion, less changes is better when dealing with a general population of 401K participants.
(Filed in retirement plans)
About a month before Vanguard eliminated Signal share minimum requirements, Vanguard also changed the Admiral requirements for retail investors. From $100K, the requirements were changed to $10K for index funds and $50K for actively-managed funds... Read More
I just ran into a rebalancing issue with Employee Fiduciary's 401k platform. My personal setup has automatic rebalancing enabled for every 3 months on the 25th. Easy breezy -- except we had a fund change from VFITX to VSIGX on... Read More
Treasury vs Government Bond
Posted by Mossy
December 21, 2010 8:25 PM
From a quick glance, it seems like VFIUX at 0.12% ER is a slightly cheaper option than VSIGX at 0.15% ER. But then my mind starting pondering deeper. Vanguard does not arbitrarily set an expense ratio for funds. Instead, they report what last year's E/R was and it's just assumed that number will be in the same range in the future. So when Vanguard launched VSIGX just a short time ago, there was no "last year" to base the E/R numbers -- where did it come from?
First step was to look at the annual reports. Here are the numbers for Vanguard Intermediate Treasury:
Next for Vanguard Intermediate Government Bond Index:
From looking at 9 months, it appears the 0.15% is mostly an estimate based on previous fund launches. The actual expense ratio is unknown until Vanguard does another annual audit.
Can we project what it might look like after more net assets accumulate? (With Signal share minimums reduced to $0, the puny $3M in Signal should increase a lot.) To estimate costs, I dwelved into a lot of annual reports and compared funds with Investor/Admiral against those funds I compared funds with Investor/Admiral shares against those with just Signal/Institutional shares. The following table is a rough estimate of costs breakdown at higher asset values:
My educated guess is VSIGX will have about the same 0.12% E/R as VFIUX very soon if it isn't at that level already. For this reason, I decided to make the switch to VSIGX immediately in our 401K pan instead of waiting a few more months for VFIUX. Less confusion, less changes is better when dealing with a general population of 401K participants.
(Filed in retirement plans)
2 TrackBacks
About a month before Vanguard eliminated Signal share minimum requirements, Vanguard also changed the Admiral requirements for retail investors. From $100K, the requirements were changed to $10K for index funds and $50K for actively-managed funds... Read More
I just ran into a rebalancing issue with Employee Fiduciary's 401k platform. My personal setup has automatic rebalancing enabled for every 3 months on the 25th. Easy breezy -- except we had a fund change from VFITX to VSIGX on... Read More
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