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The benefits of lower costs

Why cost matters

No one can control the markets. But investors can control what they pay to invest. It may be eye-opening to see the difference costs can make to an investor's long-term success.

Our client-owned structure* has allowed Vanguard to offer funds at costs consistently among the lowest in the industry. In fact, in 2016 our funds' asset-weighted average expense ratio (representing the average paid by our investors) was 0.12%. That was far lower than the industry's corresponding average (excluding Vanguard) of 0.62%.** That's an 81% difference in costs! As this advantage compounds year after year, it can help investors earn more over time. The long-term effects can be staggering.

The accompanying chart illustrates how strongly costs can affect investors' savings over the long term. In the low-cost scenario, the investor pays 0.15% of assets every year; in the higher-cost scenario, he or she pays 0.60%. After three decades, the lower-cost investor comes out ahead by nearly $70,000.

Note: This illustration depicts the impact of expenses over a 30-year period. The hypothetical portfolio has a starting value of $100,000 and grows by an average of 6% annually. The portfolio balances shown are hypothetical and do not reflect any particular investment. The final account balances do not reflect any taxes or penalties that might be due upon distribution. Costs are one factor impacting total returns. There may be other material differences between products that must be considered prior to investing. Source: Vanguard.

*Vanguard is client-owned. As a client owner, you own the funds that
own Vanguard.
**Source: Morningstar, Inc.

What's the bottom line for investors?

A hypothetical illustration

Investors could save
$4,331
at Vanguard.
$1,069
Vanguard average expense ratio 0.12%
$5,399
Industry average expense ratio 0.62%
$50,000
Investment amount
10 years
Time of investment

This hypothetical illustration assumes a 6% return for both examples. This illustration does not represent any particular investment, nor does it account for inflation. There may be other material differences between investment products that must be considered prior to investing.

Source of asset-weighted average expense ratios: Vanguard and Morningstar, Inc.