Vanguard makes its S & P 500 ETF even cheaper

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The Vanguard Group will not be left out. A start-up fintech initially offered free ETFs, but it's more and more an old story.

The latest annual reports from Vanguard, the $ 5 trillion fund manager, show that its
Vanguard S & P 500
exchange-traded funds (VOOs) now cost only 0.03%, or about $ 3 per $ 10,000 invested annually. It's cheaper than the most popular and largest ETF in the market, the
SPDR S & P 500
(SPY). It also cuts
Black rock
S
iShares Core S & P 500
ETF (IVV), which charges 0.04%.

"Vanguard has raised the bar of price competition for asset allocation products," says Todd Rosenbluth of CFRA. "Although we have SOFi's no-fee ETFs soon, these Vanguard products are extremely popular and investors are more likely to be interested in them because they are more focused on fees."

Earlier this week, Vanguard unveiled lower fees for 10 ETFs, which for the first time reduce the shares of its Admiral Mutual Funds. It seemed that there was little left to cut on the basis of the annual reports published on Tuesday. But the latest revelation Friday suggests that fees could fall further. Now that the
Vanguard Total Bond Market
The ETF (BND) has an operating expense ratio of 0.035%, lower than the
iShares Barclays Aggregate Bond
0,06% of the ETF (AGG) and the
SPDR Portfolio Aggregate Bond
ETF (SPAB) 0.04%, rivals could in turn make surgical cuts in their fees.

Vanguard ETFs could become a bigger part of its overall business. While the low-cost revolution encouraged investors to focus on costs, the company's customers are increasingly using ETFs. And as Vanguard's product assets grow, the company's business model allows it to transfer savings to customers. ETF assets represent approximately 20% of Vanguard's assets, which represent close to $ 5 trillion, but represented more than 35% of its net cash flows over the last three years. And with the increase in Vanguard ETFs' assets, fees could fall further.

For now, the $ 100 billion assets of the Vanguard S & P 500 ETF are insignificant compared to the $ 260 billion assets of the SPDR S & P 500 ETF. The SPDR S & P 500, beautifully called the "SPY", is the vehicle of choice for institutional investors and traders because of its liquidity. But a future in which the Vanguard S & P 500 ETF will overshadow the SPDR S & P 500 ETF is in sight.

"The Vanguard S & P 500 has been an asset picker and continues to generate gains in times of market crisis and tax loss collection, surpassing the iShares S & P 500," says Rosenbluth. "I strongly believe that you should not focus on costs, but when products follow the same index, it's hard to defend a more expensive product."

Rival fund managers may well shake, but investors have every reason to rejoice.

Write to Crystal Kim at [email protected]