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For the ETF VTI,

enter image description here

I tried to calculate the fee, but my number doesn't match that $71.

Here is my calculation:

enter image description here

Am I missing anything? The total fee the way I calculated is $45.57.

The formulas I am using are:

Balance: =10000 * POWER(1.09, A2-1)
Fee: =B2*0.0003

Thanks!

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  • You have only 9 years of growth listed in your chart, not 10.
    – Dilip Sarwate
    Jan 2, 2020 at 18:04
  • @DilipSarwate Thanks. I think I should add another year and calculate the sum of fees starting from year 2, so the sum is $49.68.
    – zs2020
    Jan 2, 2020 at 18:14
  • You forgot to subtract the fee from the balance... you will not get 9% growth on the portion you had to pay out in fees. Doing that, I get fees paid of $42.52, but the "cost" of the fee is $58.57.
    – Ben Voigt
    Jan 2, 2020 at 19:21

1 Answer 1

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There might have been an oversight by someone at the company, but I got the number by doing this

10,000 * POWER(1.09, 10) * 0.0003 * 10 = $71.02

Which is incorrect because the fee will have less value early on (as you have shown in your table) but it gets you to the $71 that they are advertising.

EDIT:

After digging into it some more, Vanguard has cut the VTI expense ratio a few times. Looking at this investopedia article they say that the expense ratio was dropped from 0.05% to 0.04% (and obviously it dropped again from 0.04% to 0.03%). Also in this this blog they say that the overall expense ratio was 0.046%. Doing the same math as you were doing with both of these ratios gives the following

0.04% gives a $60.77 fee

enter image description here

0.046% gives a $70.65 fee

enter image description here

0.05% gives a $70.96 fee (excluding the expense for year 1)

enter image description here

So my guess is Vanguard cut their expense ratio but didn't update this comparison of how little their fees were compared to their competitors.

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2
  • Ah I see. Thank you. That explained how $71 is calculated. And I agree with you, the total fees should be less than $71.
    – zs2020
    Jan 2, 2020 at 18:09
  • @zs2020 I found more information and updated my answer.
    – rhavelka
    Jan 2, 2020 at 19:31

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