Lowering costs is in our DNA

Our corporate structure allows us to maintain our low costs, and the proof is in the pudding. When you compare the average expenses of our mutual funds and ETFs with industry averages, you’ll see the difference.


Different ways to report costs

There are two common ways to show average fund expenses: a straight average expense ratio and an asset-weighted average expense ratio:

 DefinitionCalculation
Straight average expense ratioThe average price offered by all of our U.S.-based funds.Divides aggregate total expenses by the number of funds.
Asset-weighted average expense ratioThe average price paid by investors.Based on where money is invested. Funds with more assets have a greater influence on the average than smaller funds.

Previously, we’ve used the straight average to show our low-cost advantage. However, we believe the asset-weighted average provides a more accurate view of the fund industry, so we’ll be emphasizing that number from now on.


Our cost advantage endures

Interestingly, Vanguard’s low-cost advantage versus the industry is nearly identical when measured by either method:
2016 average expense ratios
 VanguardIndustry% Lower
Straight average0.17%1.00%82%
Asset-weighted average (excluding Vanguard)0.12%0.62%81%


Sources: Vanguard, Morningstar, Inc., and Lipper, a Thomson Reuters Company. As of December 31, 2016.

No matter how you measure the averages, we feel that Vanguard funds and ETFs offer you an important advantage.

Notes:

All investing is subject to risk, including the possible loss of the money you invest.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.