Frequency of Vanguard Costs and Charges

Saga

GeoffTF said:

Saga said:

GeoffTF said:

Saga said:

OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?

"OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?"

You cannot. You have to trust Vanguard and the regulator (FCA or the Central Bank of Ireland). The stated transaction costs are not representative of the real transaction costs anyway, as Vanguard has made clear. We still do not have full costs disclosure. Full costs disclosure would favour market weighted trackers.

Fair enough. Thanks for the info. So do investors generally not think too much at all about costs and charges once they've researched, chosen and invested in a fund as long as the amount on the periodic statement doesn't seem "too high"?

Costs are important because you can to a large degree control them, and they compound up over time. If you are investing £millions, even a hundredth of a percent (basis point) saved is a lot of money.

But I understood that you can't control costs because you don't know about them (when or how often they're applied) until after the fact when you get a statement?

GeoffTF

Saga said:

GeoffTF said:

Saga said:

GeoffTF said:

Saga said:

OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?

"OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?"

You cannot. You have to trust Vanguard and the regulator (FCA or the Central Bank of Ireland). The stated transaction costs are not representative of the real transaction costs anyway, as Vanguard has made clear. We still do not have full costs disclosure. Full costs disclosure would favour market weighted trackers.

Fair enough. Thanks for the info. So do investors generally not think too much at all about costs and charges once they've researched, chosen and invested in a fund as long as the amount on the periodic statement doesn't seem "too high"?

Costs are important because you can to a large degree control them, and they compound up over time. If you are investing £millions, even a hundredth of a percent (basis point) saved is a lot of money.

But I understood that you can't control costs because you don't know about them (when or how often they're applied) until after the fact when you get a statement?

Funds have an OCF which should be reliable nowadays. We do not really know the transaction costs internal to a fund, either before or after the event. The fund managers will have numbers, but they always keep them close to their chest. We know that market weighted trackers will have the lower transaction cost than other funds. We do not have to pay percentage platform fees. The cost of trading can be zero, or can be made a tiny percentage of a large portfolio value. We do not have to pay for advice if we educate ourselves.

dunstonh

Saga said:

GeoffTF said:

Saga said:

OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?

"OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?"

You cannot. You have to trust Vanguard and the regulator (FCA or the Central Bank of Ireland). The stated transaction costs are not representative of the real transaction costs anyway, as Vanguard has made clear. We still do not have full costs disclosure. Full costs disclosure would favour market weighted trackers.

Fair enough. Thanks for the info. So do investors generally not think too much at all about costs and charges once they've researched, chosen and invested in a fund as long as the amount on the periodic statement doesn't seem "too high"?

Costs are a secondary consideration to investment suitability and potential.   If you think an investment is going to be better value for returns over costs then that is fine to go with a higher cost fund.    i.e. if you think a fund is going to grow at 7% over a year after say 0.7% OCF whereas a similar passive fund would grow at 5% after 0.1% OCF then you go with the higher cost fund.  

Some people are returns focused.  Some people are charges focused.

But I understood that you can't control costs because you don't know about them (when or how often they're applied) until after the fact when you get a statement?

Yes you do.  They are published in advance.  And you get an ex ante cost disclosure before you buy (forward projection) and you get an ex post disclosure every 12 months (what you actually paid).  There generally insnt a lot of difference.  The OCFs tend to be stable.  The TCs can vary a bit but most ignore those.   

zagfles

dunstonh said:

Saga said:

GeoffTF said:

Saga said:

OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?

"OK, but how, for example, is an investor supposed to know if and when Vanguard have made an error in the fees taken if all it gives is a per cent value but not how and when that proportion is applied?"

You cannot. You have to trust Vanguard and the regulator (FCA or the Central Bank of Ireland). The stated transaction costs are not representative of the real transaction costs anyway, as Vanguard has made clear. We still do not have full costs disclosure. Full costs disclosure would favour market weighted trackers.

Fair enough. Thanks for the info. So do investors generally not think too much at all about costs and charges once they've researched, chosen and invested in a fund as long as the amount on the periodic statement doesn't seem "too high"?

Costs are a secondary consideration to investment suitability and potential.   If you think an investment is going to be better value for returns over costs then that is fine to go with a higher cost fund.    i.e. if you think a fund is going to grow at 7% over a year after say 0.7% OCF whereas a similar passive fund would grow at 5% after 0.1% OCF then you go with the higher cost fund.  

Some people are returns focused.  Some people are charges focused.

Of course what you "think" may not turn out the way you thought. The 0.7% OCF fund might rise 3% while the 0.1% OCF fund rises 7%. Then you've lost out double, higher charges and lower returns. Then you might ask why you thought what you thought. Too much reliance on past performance? Believing vague/misleading sales spiel?

Charges are (generally) known. Future performance isn't.