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This answer describes the lowered expense ratios of Vanguard admiral shares compared to Vanguard investor-class shares.

How do I tell from my statements that I am saving money through the lowered expense ratios? In my current Vanguard accounts I don't pay any fees explicitly (i.e. they are not itemized on my statements), and the share prices of investor and admiral shares track precisely.

Edit: Below is a direct quote of a response Vanguard sent to me. I believe they are claiming that higher net income may be paid out as dividends. However, they also say Net Asset Value (NAV) will be different, and as I stated, I've always seen the share price track precisely.

The lower expense ratios of Admiral(tm) Shares result in higher net income than that earned by comparable Investor Shares. In our stock and balanced funds, net income is reflected in the net asset value (NAV). Thus, over time, the NAV of a fund's Admiral Shares--which includes a greater amount of net income--will diverge from the NAV of the fund's Investor Shares. The higher net income of Admiral Shares may also be paid out periodically during the fund's normal dividend distributions.

At times, the NAVs of a fund's Admiral and Investor Shares may be the same one day, different the next, and then the same again the following day because of rounding differences. Regardless of share-price differences in the short run, however, a fund's lower-cost Admiral Shares are expected to provide a higher total return over time.

An account being converted to Admiral Shares may own fewer shares after the conversion, which could initially lead to a lower account balance. As the effects of Admiral Shares' lower expense ratios compound over time, however, we expect that the price of Admiral Shares will eventually be higher and should remain so. Ultimately, the Admiral Shares will earn higher income dividend distributions, resulting in a higher net total return.

For most of our bond funds, the higher net income of the Admiral Shares will be paid out monthly. Because the bond funds do not accrue income in the NAV as stock and balanced funds do, the NAVs of Admiral and Investor Shares of bond funds are expected to be identical.

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I don't think that you'll notice a difference in the NAV in a fund with fees that are low as the Vanguard Total Stock Market Fund. Their management fees are incorporated into the NAV, but keep in mind that the fund has a total of $144 billion in assets, with $66 billion in the investor class. The actual fees represent a tiny fraction of the NAV, and may only show up at all on the day they assess the fees.

With Vanguard total stock market, you notice the fee difference in the distributions.

  • The 9/22/2010 distribution for VTSMX was $0.1370/share
  • The 9/22/2010 distribution for VTSAX was $0.1450/share

In the example of Vanguard Total Stock Market, there are institutional-class shares (like VITPX with a minimum investment of $200M) with still lower costs -- as low as 0.0250% vs. 0.18% for the investor class. You will notice a different NAV and distributions for that fund, but there may be other reasons for the variation that I'm not familar with, as I'm not an institutional investor.

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For Vanguard:

  • Log into your account.
  • Go to Research Funds and Stocks and find your fund.
  • Go to the "Fees & Minimums" tab.

Vanguard does compare its fees with similar funds from its competitors on this tab, but then again, this is Vanguard giving you this information, so take with a grain of salt.

  • Thanks for your answer. I don't want to know what they report as fees, I want to see the actual effect on my account. Are share prices higher? Is there a line-item fee that is lower? None of those things seems different. – dfrankow Nov 16 '10 at 0:18
  • It looks like your edit to your question answers it: higher dividends, higher net income reflected in higher net asset value. – mbhunter Nov 16 '10 at 17:57

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