Apparently Vanguard has been a little too successful in attracting smart, fee-conscious, long-term investors.
Its relatively new exchange-traded (ETF) fund lineup has achieved remarkable success, hitting $50 billion in assets - $8.5 billion came in so far in 2008 alone. So why is Vanguard messing with such a good thing, using gimmicks the firm wouldn't use with its traditional funds?
This article off the Dow Jones Newswire offers possible explanations including:
The effect of Vanguard's share split will be to allow investors to trade the funds in smaller amounts. For now, each of the three ETFs' share price is more than $100. Shares of Vanguard Total Stock Market ETF are about $138, meaning that's the de facto minimum investment for any investor who wants to buy the fund, and the smallest increment in which existing investors can buy and sell. After the split the new number will should closer to $69."
But investors with less than $100 should probably not be investing in ETFs at all. Even at a cheap discount broker an ETF investor is going to pay $7 in commissions - which is a big chunk of a sub-$100 ETF investment. That kind of cost runs counter to one of exchange traded funds' main selling points - their cheapness of ownership. ...read the rest of this article»
Vanguard Splits ETFs For Mysterious Reasons
Vanguard Splits ETFs For Mysterious Reasons
Apparently Vanguard has been a little too successful in attracting smart, fee-conscious, long-term investors.
Its relatively new exchange-traded (ETF) fund lineup has achieved remarkable success, hitting $50 billion in assets - $8.5 billion came in so far in 2008 alone. So why is Vanguard messing with such a good thing, using gimmicks the firm wouldn't use with its traditional funds?
Vanguard announced today a two-for-one split of shares of Vanguard Total Stock Market ETF (VTI), Vanguard Emerging Markets ETF (VWO), and Vanguard Extended Market ETF (VXF)."
This article off the Dow Jones Newswire offers possible explanations including:
The effect of Vanguard's share split will be to allow investors to trade the funds in smaller amounts. For now, each of the three ETFs' share price is more than $100. Shares of Vanguard Total Stock Market ETF are about $138, meaning that's the de facto minimum investment for any investor who wants to buy the fund, and the smallest increment in which existing investors can buy and sell. After the split the new number will should closer to $69."
But investors with less than $100 should probably not be investing in ETFs at all. Even at a cheap discount broker an ETF investor is going to pay $7 in commissions - which is a big chunk of a sub-$100 ETF investment. That kind of cost runs counter to one of exchange traded funds' main selling points - their cheapness of ownership. ...read the rest of this article»