Vanguard Admiral Shares are pretty cool

I wanted to add a little more international exposure to our portfolios (if I’m reading things correctly, the IRA Roth is a great place to put international exposure because there might be higher taxes with international stock gains?  I’m not 100% clear on this– I also read something that said the opposite), so when we recently did backdoor Roths, I put the money into an international index and an international ETF.   The index (VGTSX) has an expense ratio of .18% and the ETF (VXUS) has an expense ratio of .11%.

If I have 10K invested, then I can convert my VGTSX investor shares into  VTIAX admiral shares, which will decrease the expense ratio from .18% to .11% (same as the ETF).   For most of the index funds that have admiral shares at Vanguard, the switch from more expensive investor shares to cheaper admiral shares occurs when the account has more than $10,000 invested in that specific index.  Basically Vanguard gives you a discount on the index if you have a lot invested in them.

My 2017 IRA investment was only $5,500, but it is a new year so I contributed another $5,500, which, if the stock market doesn’t crash, adds up to more than 10K, meaning I should be able to switch to admiral shares to get the lower cost fund.  So that’s what I’ve done.

I’m wasn’t entirely sure where to invest DH’s IRA this year.  He had less invested overall and thus needs less international exposure and already had the lower cost ETF.  (I know that since we’re living in a community property state that I should be looking at our accounts as a complete whole, but since I don’t know what the future will hold, I want to make sure that he’s also protected.)  I will have to see what holdings he currently has one of these days.  I suppose we’re due for one of those financial fitness days sometime so I can go through and readjust our assets etc., but maybe I’ll wait another year.  We’ve got a lot of stuff going on and can afford to put it off, especially since I’m not really sure what asset mix we should be aiming for in the first place.  In the end  I gave him more VXUS.

Do you pay attention to expense ratios?  How do they change your investment patterns?  Any preferences between Index vs ETF?

20 Responses to “Vanguard Admiral Shares are pretty cool”

  1. monsterzero Says:

    I have some Admiral shares but don’t really pay attention to expense ratios as long as they’re under 0.50%. There’s just not that much in them, particularly after buying our house last year. Since Sweetie and I started filing jointly I’m not allowed to contribute to my Roth in any case.

  2. chacha1 Says:

    Pretty much our entire retirement portfolio is in my Schwab rollover IRA. I have Vanguard funds plus “capital preservation.” I look at the fund costs before changing anything, but aside from that it’s set-and-go … we are nowhere near the point of maximizing contributions so what we’ve got to work with is this one thing, basically.

  3. Leigh Says:

    I think everything we both have is in admiral shares at this point or the equivalent at Fidelity. My husband’s 401(k) has institutional share classes so those are pretty cheap, which is nice. My 401(k) doesn’t have an international index fund as an option, so I use BrokerageLink for the entire portfolio, giving up the institutional fund that is available for the S&P 500 index. I care more about sticking to my allocation than getting that super cheap fund. I tried ETFs a long time ago, when I was first starting out, and I found them fidgety to deal with since I prefer to buy a certain dollar amount of shares, than a certain number of shares.

    • nicoleandmaggie Says:

      They’re called “Spartan funds” at Fidelity. :)

      Yeah, getting the purchase number right for ETFs is annoying. What I’ve been doing is picking a stop-limit order for the number that gets me a dollar amount closest to what they’re currently priced. That generally hits sometime that day or the next. But there’s always a chance that it won’t dip down that low and I’ll have to start over. Index funds are so much easier to just buy. Though I guess if I had lots of free time I’d have more fun gambling with stop-limit orders and so on, since you can generally make a little extra (unrealized) money using day to day variation. But these days I’m willing to lose out on potential gains in order to satisfice and just be done with things.

      • Leigh Says:

        The Spartan index funds have an Investor versus Admiral shares distinction too. I think it used to be called “Advantage” but is now called “Premium” and has the same $10,000 minimum as Vanguard’s Admiral shares. Also, weirdly, they removed the “Spartan” from the names of all the funds, which I find annoying since it was an easy way to find the series…

      • nicoleandmaggie Says:

        Huh. It’s been a while since I rejiggered our Fidelity stuff. Hopefully that’s all automatic.

      • Leigh Says:

        It seems to have been since I also forgot about it until you called them Spartan funds :) I haven’t touched my Fidelity stuff in a while either. I’ve been rebalancing with my Vanguard stuff.

      • nicoleandmaggie Says:

        … I don’t even know how to login to my fidelity account… (and it doesn’t get pulled into MINT), so I would have to look at whatever quarterly statement they sent us to know what our funds are

  4. Debbie M Says:

    Expense ratios are why I’m at Vanguard. I feel expense ratios are the only part of investing (besides contributions) over which we have control. Also, they are why I maxed out my Roth IRA first, even when Roth 403b’s became available to me.

    (Y’all did teach me about Fidelity Spartan funds, so during the brief period when I had extra funds, I invested them there. I have since rolled them over to Vanguard, though.)

    Still, I don’t use only the cheapest funds. I try to diversify as much as I can, so I do have the slightly more expensive foreign funds. I am super risk-averse, and I feel that diversification is my best protection against risk. (Unlike normal risk-averse people, I understand inflation risk, too.) I wish there were more ways to diversify–all I ever read about is stocks AND bonds! If the market fails, my IRA and pension will be in trouble. (My house will still be paid off. Who knows about SS?) So I have more small-cap than large-cap (because there are fewer large-cap companies), plus foreign (Europe, Asia, Developing), plus a REIT fund. I also have a little money on the side in growth-dividend stocks because I also like the idea of collecting dividends in the future without selling stock.

    I have been tempted by target funds, but the expense ratios are higher. So I just do my own mix. I check the standard deviation monthly (yay college math!) and rebalance a bit when it gets out of whack.

    When I started, ETFs didn’t exist, and I’m too lazy to do enough research to decide whether I have a preference. I did switch into Admiral shares as soon as I could; I agree that they are cool.

  5. nicoleandmaggie Says:

    Today is a good day to call about net neutrality:

  6. jasonedwards57 Says:

    I definitely pay attention to expense ratios. It is why I moved most of my holdings to index funds. That said, I do own two funds that have expense ratios around .5%. That is high for some in the FI community, but they perform beautifully and have for almost 50 years.

  7. Susan Says:

    I’m a Bogle investor, so I do pay attention to expense ratios, and our average across accounts is 0.09. I stick with the index funds for simplicity.

  8. Julia Says:

    I didn’t realize that there was an income limit to contributing to a Roth IRA. My husband and I are above that limit but have already maxed out our 2018 Roth IRA’s since we didn’t know about the income limit. Hmmm…now I’m uncertain what to do about this…do you have any ideas?

  9. Revanche @ A Gai Shan Life Says:

    I care a whole lot about expense ratios and aim to keep them under 0.15% wherever possible.

    I only do index funds right now because I can’t seem to get my head around ETFs. I want to be able to dump a round number of dollars into a fund and have them buy the right number of shares.

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