If Vanguard keeps cutting costs on its ETFs, soon it'll be paying you to buy them.

I'm exaggerating, but only a bit. Earlier this month, Vanguard continued its cost-cutting ways by reducing fees on four of its exchange-traded funds. Two funds that focus on big companies -- Vanguard Large Cap Growth ETF (AMEX: VUG) and Large Cap Value ETF (AMEX: VTV) -- cut their fees to 0.10%. A couple of small-cap offerings -- Vanguard Small Cap Growth ETF (AMEX: VBK) and Small Cap Value ETF (AMEX: VBR) -- followed suit, with annual costs coming in at 0.11%.

While the price cuts were very small -- 0.01% in all four cases -- it continues a trend for Vanguard's ETF offerings. During the fourth quarter of 2007, Vanguard lowered annual fees on more than a dozen ETFs.

According to recent Lipper data, the average ETF has an expense ratio of 0.53%. After this latest round of price cuts, Vanguard has left its competition in the dust with an average expense ratio of just 0.16%. A spokesman pointed out that fees were cut after "expenses wound up being less than originally estimated." While it's logical that as ETFs grow in value, they become more efficient, not every fund company would pass those cost savings on to their customers.

Using low-cost funds that track broad market indexes in a diversified portfolio is a proven way to keep your investments simple while sharing in the returns of the financial markets. If market returns continue to disappoint in the coming years, keeping a lid on fund fees will become even more critical to your investment success. By controlling your costs, you can make sure that every hard-earned dollar you make in your portfolio will work harder for you.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.