Vanguard lowers minimums on index funds, highlighting ongoing price war


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The barriers are now lower to invest in several dozens of Admiral Shares of funds from Vanguard — a company long celebrated for its low-cost index funds.

On Monday, the Vanguard Group announced it is lowering the minimum amounts customers need to invest for 38 of its Admiral Shares class index mutual funds to $3,000 from $10,000. Admiral Shares of funds are a separate share class than the regular investor class. They are cheaper but require a higher minimum investment. The company said the lowered minimums represent expense savings of 15 to 71 percent over the investor shares, depending on the fund.

The latest chapter in ongoing price war

The news represents the latest punch in an ongoing price war in the investment world. For months, firms have been slashing prices to compete with rivals and win over new clients. In August, JPMorgan Chase announced You Invest, a platform that lets investors make 100 free trades on exchange-traded funds and stocks for the first year. This summer, Fidelity Investments launched four index funds that charge no management fees. And fintech darling Robinhood lets its users trade stocks and ETFs for free.

For Vanguard, its latest announcement marks the third time the firm has lowered the Admiral Shares’ minimum since rolling them out in November 2000. The move underscores the latest way Vanguard, a firm credited with creating the world’s first index fund, is lowering the cost of investing.

“Our unique, client-owned structure enables us to consistently pass along economies of scale and lower the cost of investing for our clients, so they keep more of their returns, said Tim Buckley, Vanguard’s CEO, in a press release announcing the news.

Among the funds with lowered minimums include Vanguard Total Stock Market Index Fund and the Vanguard 500 Index Fund — the industry’s largest equity index funds, according to Vanguard. It also includes Vanguard Total Bond Market Index Fund.

The firm also said it plans to roll out Admiral Shares on five more index funds and expects those funds with the new minimums to be available for investment by the first quarter of 2019.

What this means for you

For you, this signals good news.

“Lower expenses and greater choices are almost always good things for investors,” says Mark Hamrick, a senior economic analyst at Bankrate.

Hamrick sees the news as part of a positive trend over many years in falling costs affecting everything from commissions for stock trading to the costs of fund management.

“A number of things are responsible for these declining costs or expenses including, in the cases of industry giants Vanguard and Fidelity, growing scale and more efficient technology,” Hamrick says. “When investors can hold on to more of their money, they’ll be better off in the long term.”

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