Last week, Vanguard decided to offer its lower-cost, more exclusive Admiral Class of fund shares to more investors. For most Vanguard index funds, any customer with a balance of at least $10,000 can convert their investment from the standard Investor shares to Admiral shares. Most managed funds require a $50,000 minimum to qualify. Previously, investors needed $100,000 in each fund, in each account, to qualify for Admiral class.
All qualifying investors should make this switch as soon as possible. My fund of choice, the Total Stock Market Index Fund, charges an expense ratio (annual fee based on total fund assets) of 0.07%. This is less than half the cost of the Investor Class funds of the same fund, at 0.18%. Both investments perform the same except for the difference in fees. There is no benefit to remaining invested in the standard Investor Class funds if the Admiral Class funds are available.
Vanguard will automatically convert your investments if you qualify, but you can speed the process by visiting your account on Vanguard’s website and selecting the link to do so. Vanguard warns converting customers that the stock price and performance of Admiral shares may not appear exactly the same on a day-to-day basis as Investor shares but should even out over the course of a few days.
If you manually convert your eligible funds rather than waiting for the automatic conversion, you will go through the process of converting one at a time.
I would prefer that Vanguard offer the lower-cost funds to investors with smaller balances. While I understand the desire to reward customers who invest more money with the discount brokerage, it would be a benefit better suited for those who may need to keep as much of their investment as possible. Additionally, if the funds can be offered at a lower price at all, the discount might as well be offered to everyone.
Published or updated October 12, 2010.