Confused about "low balance" fees...

[soupcxan]

This is probably a beginner's question, but I couldn't find a decent answer on google or vanguard.com. For example...the vanguard prospectus talks about an annual $10 low balance fee if your non-retirement account balance in VBMFX goes below $2500. So if I buy $2500 of VBMFX in my taxable account (with scottrade or datek or whoever) and in June when they look at it, the value has declined to $2400, do I get hit with a $10 penalty? Or does that only apply to vanguard funds held inside a vanguard account?

What if I had $2400 in VBMFX in my taxable account and $2400 in the same fund in my roth, would I still get the penalty?

 

[John Galt]

Hey soupxcan.............if you are worried about a $10
penalty, you need a new approach. But really, you were kidding, right?

John Galt

 

[Bob_Smith]

What if I had $2400 in VBMFX in my taxable account and $2400 in the same fund in my roth, would I still get the penalty?

They will ding you per account. Your Roth is exempt from the low balance fee, but they won't "count" money in a Roth toward a low balance in a taxable account. The only ways I know of to avoid it: 1) hold $50,000+ at Vanguard, and 2) be related to a Voyager/Flagship client. My daughter is in your situation and all fees are waived due to her relationship to me. Someone correct me if I'm wrong.

 

[KB]

I think you're right Bob.

 

[soupcxan]

Hey john...as I'm just starting out, I have the minimum invested ($2500) in a few vanguard funds...in the long run, $10 doesn't matter (and I should have substantially more in the funds by the end of 2004), but I'll do my best to avoid ANY fee if I can. In light of this, if one of the funds is a little below the min balance as of june, I'll kick in an extra $100 to avoid the fee.

 

[soupcxan]

Now that this has me thinking, I was reading the prospectus on BGEIX, which says:

"Account Maintenance Fee
If you hold Investor Class shares of any American Century fund, or Institutional Class shares
of the American Century Diversified Bond fund, in an American Century account (i.e., not a
financial intermediary or retirement plan account), we may charge you a $12.50 semiannual
account maintenance fee if the value of those shares is less than $10,000."

To me, this seems to say that if I keep my BGEIX shares in a datek/scottrade/whatever account, I don't have to worry about the maintenance fee...am I reading this right? I assume that the 3rd party broker is the "financial intermediary" that they speak of.

 

[BigMoneyJim]

I'm not quite sure how the Vanguard minimums work. My total fell below $50k for a while, and I had less than $20 in VUSXX and never noticed a fee. I was looking for it because I was curious. I think I was below the minimum in another fund, too, but I'm not sure and I never saw a fee.

(VUSXX has a $50k minimum itself, but I got into it inside a 401(k) plan that allowed me to bypass the minimum and then rolled it into an IRA. I'm holding a few bucks in there to "keep my foot in the door" for when I want some money in a MM fund.)

 

[windedhare]

I confirm I am getting hit with an account maintenance fee for each fund <10K I have with Vanguard. Not too crazy about that, but it won't be much longer before the auto-investments reach that min.

 

[ordway]

I don't know if it works that way for Vanguard, but I know for Fidelity they do have a small balance fee (which you get hit with even if it's the market's decline that causes your balance to go down) but if you have something like $50K or more total with them, the fees are waived. It's one of the reasons I find it convenient to have most of my investments with them (the only exception being my husband's 401k).