Cheaper than Vanguard

[mpeirce]

BlackRock broad-market iShares ETF becoming cheaper than Vanguard's | Reuters

Nov 10 BlackRock Inc on Tuesday will announce it is slashing fees on seven of its exchange-traded funds, making one iShares product cheaper than a competing offering from low-cost rival Vanguard Group.

With the drop in annual expenses - from 0.07 percent of assets to 0.03 percent for the iShares Core S&P Total U.S. Stock Market ETF - the sticker price of that $2.8 billion fund will fall below that of the Vanguard Total Stock Market ETF , which is responsible for $58 billion in assets. The Vanguard fund carries a 0.05 percent expense ratio.

For those looking for the absolute best deal...

 

[Totoro]

Competition, good.

Thanks for posting

 

[mickeyd]

I love to hear that other firms are reducing their ERs below VG. That should be an indicator that VG will be making a move soon. Just sayin...

 

[Ian S]

While it's nice to have low fees, I'm primarily interested in performance and I'm still not convinced that passively managed funds with the most rock bottom fees will always perform better than actively managed funds that have higher fees.

 

[mpeirce]

...I'm still not convinced that passively managed funds with the most rock bottom fees will always perform better than actively managed funds that have higher fees.

Of course not. There will definitely be funds that outperform the index funds. But on average, they don't - especially after fees.

Of course you have to figure out which one will do this in the future. Good luck with that!

(I'm a mostly index fund investor)

 

[samclem]

BlackRock broad-market iShares ETF becoming cheaper than Vanguard's | Reuters



For those looking for the absolute best deal...

On the mutual fund side, Fidelity Spartan funds can sometimes be cheaper than Vanguard counterparts. I own some, but only because I had to go with Fido for my Solo 401K (Vanguard didn't have them then, they do now). On the whole, I trust Vanguard a bit more to keep their prices low for the long haul, due to their corporate structure and culture. We'll see.

 

[NW-Bound]

Free market is good. Fair competition is good. Adam Smith is smiling in his grave.

 

[photoguy]

Are they actually running their fund cheaper than Vanguard? or are they subsidizing the ER for use as a loss leader/marketing?

 

[wanaberetiree]

While it's nice to have low fees, I'm primarily interested in performance and I'm still not convinced that passively managed funds with the most rock bottom fees will always perform better than actively managed funds that have higher fees.

you have a difficult task to cherry pick those...

 

[MRG]

Follows the long term trend of lower fees. Competition is good for all of us.

 

[samclem]

you have a difficult task to cherry pick those...

Shhhh! There's a whole industry that depends on folks who are sure they can pick a winner.

 

[Ian S]

Shhhh! There's a whole industry that depends on folks who are sure they can pick a winner.

Even with an index fund you still have to pick which index you think will be a winner.

 

[wanaberetiree]

Well you would pick what you need to have your AA in order.


Sent from my iPad using Early Retirement Forum

 

[samclem]

Even with an index fund you still have to pick which index you think will be a winner.

Re: equities--Lots of folks bet on everything (US and Intl), so there's not much "picking" and they can be sure to do as well as the markets as a whole. As far as choosing an asset allocation, that's just setting a mix you are comfortable with and rebalancing back to it. No gurus, low costs.

 

[youbet]

Even with an index fund you still have to pick which index you think will be a winner.

So true! There are dozens and dozens of indexes. You can choose to keep things very broad with total USA, total world ex-USA, total USA bond, etc. Or you can slice and dice the equity and fixed markets by picking indexes representing subsets of the broad indexes.

Most of my holdings are in index funds. But I have not been able to keep the number of funds to a simple 3 or 4. And some actively managed funds like Wellesley have slipped in too....... Then there's the individual stocks and bonds.

On the subject of expense ratios, once they're below 0.1 or so, I don't worry about it. Of all the things I need to do to optimize my portfolio for highest earnings and lowest taxes, fretting over whether a fund or ETF's ER is 0.07 or 0.05 doesn't rank very high.......

 

[LOL!]

Once expense ratios are down into the single basis points then other factors become more important. Those factors include tax-efficiency, tracking error, liquidity (average daily volume), bid/ask spread, commissions (one shouldn't pay commissions), premium/discount to NAV, how NAV is calculated (is it accurate?), reactions to flash crashes, and so on.

I cannot imagine any sane person selling something with e.r. of 0.07% in order to move to something with e.r. 0.03%, but I suppose those folks exist.

 

[samclem]

I cannot imagine any sane person selling something with e.r. of 0.07% in order to move to something with e.r. 0.03%, but I suppose those folks exist.

Well, that's $400 per year on a $1 million portfolio, and you get it for spending 15 minutes online. Given what I see people do in the supermarket checkout lane to save $0.35 on a roll of paper towels, I'd say some folks are probably doing it.
Like you, I probably wouldn't swap funds for an ER difference of .04%, but I do place a premium on making sure it doesn't pop up, as I tend to not watch that stuff closely. So, I wouldn't go for a teaser rate, etc.

 

[unclemick]

Are they actually running their fund cheaper than Vanguard? or are they subsidizing the ER for use as a loss leader/marketing?

Right! Are these the kind of guys you would buy a used car from? Or maybe not!



heh heh heh - old age, a few decades with Vanguard and following Mr. B I'm not in a big rush to change.

 

[Cobra9777]

I cannot imagine any sane person selling something with e.r. of 0.07% in order to move to something with e.r. 0.03%, but I suppose those folks exist.

Well, that's $400 per year on a $1 million portfolio, and you get it for spending 15 minutes online....

And that $400 every year turns into $27K over 30 years, compounded at 5%. I've seen forum members here open new checking and credit card accounts for a one-time $100 signup bonus. It's all free money, but I'll take $27K for 15 minutes effort. Guess I'm headed for the asylum.

 

[MRG]

And that $400 every year turns into $27K over 30 years, compounded at 5%. I've seen forum members here open new checking and credit card accounts for a one-time $100 signup bonus. It's all free money, but I'll take $27K for 15 minutes effort. Guess I'm headed for the asylum.

Like a Fox.

 

[Totoro]

Transaction costs in switching will eat up years of that 0.04% advantage.

I'd use it for allocating new money vs. switching funds.

 

[samclem]

Transaction costs in switching will eat up years of that 0.04% advantage.

I'd use it for allocating new money vs. switching funds.

If we're talking about mutual funds in a tIRA, RothIRA, etc, the transaction and tax costs would typically be zero.

 

[youbet]

Well, that's $400 per year on a $1 million portfolio, and you get it for spending 15 minutes online. Given what I see people do in the supermarket checkout lane to save $0.35 on a roll of paper towels, I'd say some folks are probably doing it.
Like you, I probably wouldn't swap funds for an ER difference of .04%, but I do place a premium on making sure it doesn't pop up, as I tend to not watch that stuff closely. So, I wouldn't go for a teaser rate, etc.

In the situations where I've discovered an equivalent fund at a slightly lower ER, I'm often constrained because I've held the higher ER fund for many years and would have to pay whopper LTCG taxes doing the conversion. Fortunately, all of these involve differences of a few 0.01%, but it's still irking that you must pay LTCG taxes on these conversions from fund to fund tracking the same index.

If there was serious money involved, I guess I'd work on it harder.

 

[eta2020]

While it's nice to have low fees, I'm primarily interested in performance and I'm still not convinced that passively managed funds with the most rock bottom fees will always perform better than actively managed funds that have higher fees.

Not always...just most of the time.

 

[mrfeh]

Are they actually running their fund cheaper than Vanguard? or are they subsidizing the ER for use as a loss leader/marketing?

I don't care what their motivation is. All that matters is the cost to me.