Tag Archives: expense ratio

How to Vanguard using ETF instead of Mutual Funds to gain lowest expense ratio

The Vanguard ETF’s have the same expense ratio as the Admiral Shares which are the best expense ratios available for Vanguard funds. The only difference is a) the minimum to open (with Admiral Shares usually $10K per Fund, with ETF cost of 1 share) and b) ETFs have a bit more short term volatility potential. Here is the Portfolio and Percentages to Total in the Portfolio I like:

Stock Symbol & Percentages of Portfolio

BND 7%
BLV 7%
VTI 19%
VXF 6%
VOO 19%
VEA 9%
VWO 7%
VXUS 10%
VNQ 16% Total 100%

The above Portfolio has bond, total stock and s&p 500 elements with real estate and international combined. I use a spreadsheet and divide the amount I have to invest at any given time by each of the percentages then multiply by the current stock price, the more you invest at one time the closer the numbers come to the exact percentages above, it will not be exact but if you keep investing over time they will become very close. If anyone wants a sample spreadsheet of how this is done just drop me a note and I’ll send you one (specify either xls or ods format). I look at each element and monies invested in the portfolio separately to say it has total market, total international, bond, s&p 500 and real estate exposure. The only controversial part seems to be the bond part whereas some are shying away from bonds and others maintain a bond element even when principal has a slight loss and dividends are very small. In the above scenario the bond portion is 14% and the stock portion is 86%. This would be categorized as very aggressive, others coining the current bond business as bad business would like to do away with the bond element altogether, whereas a Boglehead may keep a much larger bond element (30-50%!).  There are portfolios with a higher bond to stock ratio, these may be adjusted to taste of course!
Above ETFs can be purchased, commission free, at http://vanguard.com

I have nothing but praise for the Vanguard folks and for the way the company is run and how business is conducted there. I currently do business with 5 brokers and have done business with as many as 7 at a time in the past and Vanguard is the best in all aspects barring trade prices, however, it should be noted I have traded with companies with a higher and lower trade cost which put a bad taste in my mouth and whereas you can find lower trade costs overall I tend to want to put my business in Vanguard rather then in the other brokerage houses. This goes for now and in the past 5 years as well.

PSS – Total combined expense ratio with respect to above percentages is currently 0.0926% which is slightly lower then the 0.10% of mainstream Vanguard funds and higher then then 0.05% of the Vanguard Index funds, generally speaking. To understand the Effects of Expenses on a Portfolio follow this link for a spreadsheet.

Disclosure: I currently own or have owned all stocks of ticker symbols mentioned. I am usually planing to buy more as soon as I can afford it and/or within the next 72 hours. I do not expect any statements I make to significantly alter the stock price and if it did it would not affect my decision to buy or sell any stocks or funds listed.