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How would you like your mutual fund fees to go to zero? I love it and suspect you would too. Some professors from Chicago think that is a near term likelihood. I hope so. Here is a Link to a recent article they published:
As long as you're comfortable with this, then you're right:
Third, mutual funds are increasingly finding that they can generate income from nonfee sources. In fiscal 2017, the Vanguard Total Stock Market Index Fund earned more than 63% of its expenses by lending securities. The demand for securities loans has limits, but growth in that market will allow an increasing number of funds to offset some or all of their expenses through loan income.
Such lending is not without risks, but for many investors those risks are acceptable. It's important though that investors understand what the risks are.
Third, mutual funds are increasingly finding that they can generate income from nonfee sources. In fiscal 2017, the Vanguard Total Stock Market Index Fund earned more than 63% of its expenses by lending securities. ...
Such lending is not without risks, but for many investors those risks are acceptable. It's important though that investors understand what the risks are.
Notably, while Vanguard plows 100% of its net lending income back into the funds, typically only 70% or so is returned to the fund investors. That makes it harder for most fund management companies to cover their fund expenses this way.
Also stated in the doc, Vanguard does not lend any fixed income securities.
Is the lending of funds going on for both sides of Vanguard ? A few years back VG wanted to move me & others to their brokerage, which I did. Now as I'm told some individuals still hold their funds with VG, not VG Brokerage. Just wondering, Derf
Comments
Regards,
Ted
http://archive.is/4UDpQ
https://personal.vanguard.com/pdf/ISGSL.pdf
Notably, while Vanguard plows 100% of its net lending income back into the funds, typically only 70% or so is returned to the fund investors. That makes it harder for most fund management companies to cover their fund expenses this way.
Also stated in the doc, Vanguard does not lend any fixed income securities.
Thanks for your in depth analysis and references. It's a better overall submittal because of your fine contributions.
I especially want to thank Ted for providing an additional Link that allows greatly expanded access. I was unaware of the WSJ subscription constraint.
Best Wishes to all.
Just wondering, Derf