Value of ownership
Announcing the largest fee cut in Vanguard history
February 03, 2025
Once again, Vanguard is lowering the cost of investing. Effective February 1, 2025, the firm reduced fees on 168 share classes across 87 funds. The fee reductions are expected to save investors more than $350 million this year alone.1
Why investment costs matter
Vanguard Founder John C. Bogle explained why investment costs matter this way:
In investing, realize that you get what you don’t pay for. Whatever future returns the markets are generous enough to deliver, few investors will succeed in capturing 100% of those returns, simply because of the high costs of investing—all those commissions, management fees, investment expenses, yes, even taxes—so pare them to the bone.2
May 1 will mark Vanguard’s 50th anniversary. All along, we have emphasized the importance of limiting the cost of investing. Lower costs leave more money in investors’ funds and raise their potential returns. Indeed, across the industry, lower-cost funds have historically outperformed higher-cost funds on a net-of-expenses basis.3
Lower-cost portfolios tend to outperform higher-cost ones
At Vanguard, we believe our funds’ impressive long-term performance owes much to their low costs. For the 10 years ended December 31, 2024, 88% of our equity funds outpaced the average results of competing funds. The performance of our actively managed fixed income funds has been even better: 91% of our active bond funds and 100% of our money market funds have outpaced their peers’ average results.4
Vanguard executives comment on fee reductions
Vanguard Chief Executive Officer Salim Ramji and President and Chief Investment Officer Greg Davis discuss the fee cuts in this brief video.
Read the transcript
Massy Williams: Salim, Greg, some very exciting news we have to share with investors: Vanguard announced the largest fee cut in our history, lowering expense ratios across 168 mutual fund and ETF share classes by a total of more than $350 million this year.
Salim Ramji: Yeah, it is really exciting. This fee cut speaks to what our founder, Jack Bogle, set out to do, which was create an investment company that was designed for one constituency, and that's our investors. Bogle had a great phrase: “You get what you don’t pay for.”
Massy Williams: That’s correct.
Salim Ramji: There’s a false dichotomy between, Do you want great performance or high quality, or do you want low costs? At Vanguard, you can get both. This is over $350 million of estimated savings—the largest expense cut in our history. Since 1975, we've actually reduced our funds' expense ratios more than 2,000 times.
Greg Davis: Lower fees mean fund investors can keep more of their returns and a competitive edge for our funds.
When you think about our actively managed funds, our managers don't have to take unnecessary risk to earn back our fees. Our financial model and structure creates a virtuous cycle of economies of scale, where we can continue to reduce fees and invest in things like technology and talent. And as a result, our edge just keeps getting sharper.
Massy Williams: Thank you both. Just another example of our commitment to saving our investors over $350 million and helping to give them the best chance for investment success.
Largest Vanguard share classes with reduced fees*
*New expense ratios effective February 1, 2025. Excludes Institutional Shares. Largest share classes reflect assets under management as of November 30, 2024.
Following our latest fee cuts, Vanguard funds are less expensive than ever. Consider that:
- Overall, 86% of Vanguard mutual fund and ETF assets are in the lowest-cost deciles of their peer groups.5
- The average expense ratio for our index fixed income ETFs is only 0.037%.6
- Our active fixed income ETFs have an average expense ratio of 0.105%—the lowest among leading issuers of such ETFs.7
- 100% of our actively managed fixed income funds are now in the lowest-cost deciles of their peer groups.8
Fund fees and Vanguard fee cuts, explained
Our lower fees are the estimated annual operating costs of the affected fund share classes, expressed as percentages of their average net assets. Also known as their expense ratios, the fees are detailed in the funds’ prospectuses. The prospectuses of all affected funds were updated February 3 in filings with the Securities and Exchange Commission. The amended prospectuses also are available on Vanguard’s client-facing websites for:
Operating costs generally are deducted from the income that mutual funds and exchange-traded funds earn on their holdings. Expense ratios may cover investment advisory fees, marketing and distribution expenses, brokerage fees, and custodial, transfer agency, legal, and accounting fees.
All Vanguard share classes with reduced expense ratios, effective February 1, 2025
1 Savings due to the reduction in expense ratios were calculated on a share class basis for each fund for which there is a Vanguard-initiated reduction. AUM as of November 30, 2024, for each relevant share class was multiplied by 2024 expense ratios. The same AUM data was then multiplied by 2025 reduced expense ratios. The difference was added across funds to determine the total estimated savings to Vanguard investors holding those funds in both 2024 and 2025.
2 Speech delivered at The World Money Show, Orlando, Florida, February 2, 2005.
3 See, for example, Principles for Investing Success, Vanguard, 2023.
4 Source: LSEG Lipper. Numbers of Vanguard funds that outperformed their Lipper peer-group averages for the 10-year period ended December 31, 2024: 168 of 191 equity funds, indexed and actively managed, and among active fixed income funds, 6 of 6 money market funds and 40 of 44 bond funds. Results will vary for other time periods. Only funds with minimum 10-year histories were included in the comparisons.
Note that the competitive performance data shown represent past performance, which is not a guarantee of future results, and that all investments are subject to risks. For the most recent performance, visit vanguard.com/performance.
5 Source: Vanguard calculations, based on data as of November 30, 2024, from Morningstar Direct. Peer groups are defined as products with the same Morningstar category, investment type, and management style.
6 Source: Vanguard calculations, based on data as of November 30, 2024, from Morningstar Direct. Average expense ratio is asset-weighted.
7 Source: Vanguard calculations, based on data as of November 30, 2024, from Morningstar Direct. Average expense ratio is asset-weighted. Leading active fixed income ETF issuers are based on assets under management in such funds. Vanguard’s average expense ratio was lower than the top 10 active fixed income ETF issuers.
8 Vanguard calculations, based on data as of November 30, 2024, from Morningstar Direct. Peer groups are defined as products with the same Morningstar category, investment type, and management style.
Editor’s note: Originally published on February 3, 2025, this article was updated on February 27, 2025.
Notes:
All investing is subject to risk, including the possible loss of the money you invest.
For more information about Vanguard funds and ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
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.
Vanguard is reducing expense ratios for certain share classes of some funds. There is no guarantee that any individual investor will save money due to the reductions in fund expense ratios. Not all fund share classes will have a reduced expense ratio and therefore not all investors will experience the estimated savings. Investors that purchase the relevant funds after the expense ratios have been reduced will not experience savings. Savings means future money not spent on expense ratios, and does not entail a rebate or deposit of any sort. Savings figures are estimates and should not be relied upon. Savings is based on data as of November 30, 2024; if other data is used, savings may differ. Estimated savings accrue to existing investors holding relevant share classes for 2024 and 2025. For illustrative purposes only. Past performance is not indicative of future results.
Vanguard is owned by its funds, which are owned by Vanguard's fund shareholder clients.
Vanguard Treasury Money Market Fund: You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor is not required to reimburse the Fund for losses, and you should not expect that the sponsor will provide financial support to the Fund at any time, including during periods of market stress.
Vanguard Municipal Money Markets: The Fund is only available to retail investors (natural persons). You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The Fund may impose a fee upon the sale of your shares. An investment in the Fund is not a bank account and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor is not required to reimburse the Fund for losses, and you should not expect that the sponsor will provide financial support to the Fund at any time, including during periods of market stress.
