| Vanguard lowered the annual expense ratios on nearly 170 share classes this month, including mutual funds and ETFs. Fees have a huge influence on long-term returns. And the cuts are a big deal because there is more money than ever in Vanguard mutual funds and ETFs. As of the end of last year, Vanguard had $10.4 trillion in assets under management. The firm serves more than 50 million investors worldwide. Assets under management have increased more than eightfold since 2005. That means this month's cuts will save investors roughly a billion dollars over the next three years. That's assuming that Vanguard doesn't cut its fees even more. (CEO Salim Ramji notes that the firm has lowered the annual expenses on its funds more than 2,000 times.) Whenever you're looking to put fresh cash to work, check out the Vanguard ETFs first. Take the $200-billion Vanguard FTSE Developed Markets Index Fund ETF (NYSE: VEA), for example. The fee on the fund is now .03%, half its already low previous fee of .06%. An investor looking to invest $100,000 to gain some global diversification will absorb only $30 in fees the first year. (Even a million-dollar investor would pay only $300.) Fees this low were unheard of when I got into the money management business 40 years ago. Heck, my firm sold some mutual funds with an 8.5% front-end load. (That's not a misprint.) For comparison purposes, an investor in the rival iShares Core MSCI EAFE ETF (BATS: IEFA) pays more than twice as much as Vanguard investors. Does that mean you should switch your existing funds and ETFs over to Vanguard? That depends. If those funds are in a tax-deferred account or in a taxable account but trading close to - or below - your cost basis, the answer is yes. But if you have a substantial capital gain, it probably doesn't make sense to pay a big capital gains tax to enjoy lower annual fees. (Unless, of course, you're a young investor with a long investment horizon.) Remember, however, that you can use losses on other positions - including individual stocks - to offset any realized gains. So take a look at your whole portfolio. Why am I making a fuss about low fees? Because they matter... a lot. If, for example, you had invested $10,000 in Berkshire Hathaway (NYSE: BRK-A) when Warren Buffett took the helm 60 years ago, it would be worth over $560 million today. Yet if Berkshire had charged the typical mutual fund fee of 1.5% each year, your investment would have grown to just $265 million over the period. (Still not bad... but less than half as much, since you would have paid almost $300 million in fees.) Bottom line? Use Vanguard. Because in the world of investing, you get what you don't pay for. Good investing, Alex | 
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