Originally Posted by FinanceDude
.40 bp on a Vangaurd fund? Whatever happened to .18-.25??
The assets of the fund won't be huge from inception. Therefore, they have to charge a higher ER to pay for all the expenses. As the assets grow, the ER will be lowered (if Vanguard's past actions on lowering expense ratios is any indication).
For example, the fund I mentioned, Vanguard Dividend Appreciation Index Fund, has been around for 6 months and has assets of $151 million in the mutual fund and ETF versions. At 0.28% ER for the ETF and 0.4% ER for the mutual fund, they are bringing in around $500,000 a year for management expenses. Probably a lot of that goes to pay Mergent for use of their index.