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One of the most important steps you can take when embarking on your working life is to plan ahead, and start saving for your retirement. Through the wonders of compound interest, small amounts saved today, can multiply and become thousands of dollars later on.

One of my favorite places to take that first step and invest in the past has been Vanguard. The reasons? Their expenses are so low when compared to other companies, and as we all know the expenses that you're paying can make or break your returns. Also, they have a wide offering of index funds to choose from (which I prefer) and even some of their actively managed funds are very affordable.

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Now Vanguard is making their offerings even more attractive to newer investors as they announced this month that they were cutting fund minimums to $1000 for a wide range of their more popular funds.

Vanguard Fund Minimums Cut

In their announcement this month Vanguard announced that for the first time a wide range of their Target Retirement Funds would be having an initial investment cost of only $1000.

To help investors take the first step toward a more financially secure retirement, we’re lowering the minimum initial investment for our popular Target Retirement Fund series from $3,000 to $1,000, effective immediately. Previously, only one of our funds, Vanguard STAR® Fund, had a $1,000 minimum.

The Target Retirement funds are among the most popular at Vanguard because they offer an easy way to have a diversified portfolio that changes your risk level as you get closer to retirement, while having the costs be relatively low. It's actually one of the main ways we're investing.

Among the Target Retirement Funds affected by the lower minimums:

Target Retirement 2010

Target Retirement 2015

Target Retirement 2020

Target Retirement 2025

Target Retirement 2030

Target Retirement 2035

Target Retirement 2040

Target Retirement 2045

Target Retirement 2050

Target Retirement 2055

Also affected in this change are a variety of other funds that are having their minimums lowered and standardized.

In addition, Vanguard is standardizing the minimum investment for Investor Shares of nearly all our other funds at $3,000. Previously, fund minimums for the affected funds ranged from $3,000 to $25,000. This change reduces the minimum investment for 15 Vanguard funds, including some of our oldest and largest actively managed funds, such as the Wellington™ Fund, Windsor™ II Fund, and Health Care Fund.

So most other funds have had their minimums lowered to only $3000, which makes them that much more accessible to the average investor.

Cutting Fund Minimums Should Allow Younger Investors

I've been saying for a while that I thought that Vanguard and others should lower their minimums for some funds to allow younger and newer investors to get into the game earlier. It only makes sense. Now Vanguard has done just that, and I think it can only be a good thing.

“Investing early and investing regularly are two of the most important things investors can do to help ensure their retirement readiness,” said Vanguard CEO Bill McNabb. “By reducing the investment requirements for our target-date funds, we hope to encourage more individuals to participate in the financial markets.”

Most people should be able to scrape together $1000 to get started, and I think we'll be seeing quite a few people do just that.

Does this change make you more likely to invest with Vanguard? Have high fund minimums kept you on the sideline in the past?

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