Vanguard’s U.S. office has rolled out a new campaign to raise investors’ awareness of the price tag of their investments. The firm has developed an online cost calculator, and is also relying on social media and online ads to educate investors on investment costs.
According to research by Vanguard, a 25-year-old hypothetical investor who contributes 9% of a $30,000 annual starting salary to a balanced fund with expenses of 1.25% would be, at retirement, roughly $100,000 behind someone investing in a portfolio with expenses of 0.25%. All other things being equal, by choosing a fund that’s five times more expensive, an investor would forgo 20% of a portfolio’s value over a 40-year career.
“The missed opportunity for investors is that a couple of basis points may not seem significant on the surface,” said Tim Buckley, managing director and head of Vanguard’s retail investor group in the U.S. “But, in the words of Benjamin Franklin, ‘a small leak will sink a great ship.’”
To help investors easily see the role of cost in a portfolio, Vanguard has introduced an online calculator that enables them to compare funds and ETFs, determine how much money they can save over time, and identify low-cost alternatives.
Vanguard is also using its website, blog and social media accounts to help educate investors about mutual fund costs.