What the F**k is Vanguard?

If you read or listen to anything related to personal finance, you have heard of Vanguard Funds. But WTF are Vanguard Funds and why are they so popular?

Vanguard and its founder, John Bogle, are investing legends and for a good reason. Bogle founded the first index fund, beloved of hands-off investors everywhere, in 1975. That Vanguard Fund, the Vanguard 500 Index Fund now has more than $500 billion under management.

What is Vanguard?

Vanguard is an investment advisor with more than $5.1 trillion under management. Vanguard is also the leading provider of mutual funds and second largest provider of ETFs. The founder, John Bogle, has long been a champion of offering low cost, low effort investing to the average person.

Why are Vanguard fund fees so low?

Because Vanguard is not owned by outside stockholders as most investment management companies are. Outside investors want returns, and those returns come in the form of fees charged to customers.

Vanguard has no outside investors. The company is owned by its funds, and the funds are owned by their shareholders, which is everyone who invests with Vanguard.

This structure is why Vanguard funds have low fees. Those low fees mean more money in the pockets of Vanguard’s investors/owners.

Why Fees Matter

When you see a fee of 2% (if you pay attention to investing fees at all), you think that sounds pretty good! Two percent is nothing. And that’s true. A 2% interest rate on your savings account is nothing.

Getting 2% off when you buy a dress is nothing.

But a 2% investing fee isn’t nothing. It’s something; it’s a lot of something. And that something is the money you have to live on in retirement.

If you had $100,000 invested earning 6% for 25 years and paid no fees, your $100,000 would become $430,000. If you paid a 2% fee in that same scenario, your $100,000 would become a mere $260,000. That seemingly small 2% just obliterated nearly 40% of your retirement savings!

Why We Love Vanguard Funds

We love Vanguard, and we aren’t alone.

“According to a recent Harris Poll, which identifies and ranks the strongest brands in nearly 100 categories, Vanguard is the only financial services company in the “Top 13 Brands of the Year with the Largest Equity Increases.” They are also ranked as the top financial services brand in the investment category.”

Vanguard opened up investing to the masses. You no longer had to have a million dollars and a personal financial advisor to grow your money in the stock market.

Investors also love the Vanguard philosophy that a mutual fund company should be managed with the interests of the fund shareholders at the forefront.

And low fees are in the interest of the shareholders. Vanguard funds average expense ratio is 0.19% compared to the industry average of 1.08%.

And putting paid to the myth that paying more means better performance, 86% of Vanguard funds have outperformed similar funds for the last five years and had an outperformance rate of 94% over a ten year period.

VG Mutal Funds

When you invest in a mutual fund, you are invested in hundreds of individual securities at the same time. This protects your investment by lowering your risk.

All of your eggs are not in the same basket. If one basket does poorly, the other baskets can offset it.

Mutual funds are an inexpensive way to invest. You pay one expense ratio rather than paying a commission each time you buy or sell individual securities.

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