Talk:The Vanguard Group

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Investing in Vanguard is still an bet on the success of America--Philosophistry

I would imagine better than every other large mutual fund except for possibly Warren Buffet's fund, or the Fidelity Magellan fund, which did very well until the portfolio manager left (to go work with Buffet as a matter of fact).

Berkshire Hathaway is not a mutual fund. -- Subsolar 22:17, 29 August 2007 (UTC)

Aside from Buffet and the ex-manager of the Magellan fund, no-one has been able to consisently do better than the index. In addition, the managers of mutual funds that can't pick stocks any way...also charge high fees, and incur many high capital gains taxes due to constant trading.

That's why finance professors always invest in Vanguard...

That's why it's guys like Jim Cramer living the high life, while econ profs are at work grading exams.

>>>Wow! Who is writing this nonsense? For you mentally challenged Vanguard-ologues out there I will share the most cynical words I have ever heard on Wall Street. It comes right from the top at Vanguard when chided about the quality of financial advice his firm doles out "Hey, when you pay peanuts you can only hire monkeys!"

I have heard a VAGUELY similar quote. I trust the accuracy of my quote a bit more because I heard it directly from Gus Sauter. Gus said that his job (at the time, managing just three index funds) counld be done "by a trained monkey" but that they only "pay (him) peanuts".

A bit of mondesty there, since even his 500 index would step slightly outside of the index when changes to the S&P 500 were coming up, helping the fund get closer to the performance of the index than the expense ratio would seem to allow. Also, Gus was hired by Vanguard with little more to recommend him than a freshly minted MBA. In the earliest days of the index, Gus was basically a computer jockey with an unusually high profile.

Outside of that, the quote above is simply absurd. Salaries and benefits at Vanguard were, and are, quite comperable. While there were people who left Vanguard for SEI, Schwabb, etc. there were equal numbers coming from the same employers. While front line staff at Vanguard might make a bit less than those at Fidelity's home office, sub-suburban Philly is a far cheaper place to live.

Fund managers (who are mostly not Vanguard employees) usually work for for-profit management companies (or ARE those companies) and are paid on terms that are consistent with other fund companies. (Some of them are the largest investors in several Vanguard funds (index and otherwise).

Vanguard cuts a few minor corners: timing anual report mailings so they can go in envelopes with account statements, encouraging investors to use the website when possible, etc. Most of their cost advantage is structural: Vanguard is owned by the people who invest in the funds, not by shareholders of a corporate parent that expect a profit to be extracted from shareholders. Vanguard gains NOTHING by someone exchanging from one Vanguard fund to another, so there is no incentive to "churn" (to generate commissions). Mdbrownmsw 14:54, 29 June 2006 (UTC)

To think that Americans trust $1 billion to these charlatans and they laugh at you behind your backs.

Those "charlatans" are some of the largest investors in those same funds. Your attack is absurd. Mdbrownmsw 14:54, 29 June 2006 (UTC)

Also, Peter Lynch ran the Magellan Fund, and last I saw him he and his cocker spaniel were walking to his office in Boston, that's about 2,000 miles away from Buffet in Omaha. Finally, there are literally hundreds if not thousands of money managers who consistently beat the indexes. They do it over any time-frame you would like to use. Take a look at the world's largest mutual fund, Growth Fund of America. It whips the index over 1,3,5,10,15,20, 25 year time periods...and that's a growth focused fund....value indexes (which you cannot buy as an index as it takes research to uncover value) top market index by an average of 3% a year over the long run. Finally, if you use Morningstar's numbers 26% of all funds did better than the Vanguard index over the past ten years and 42% of all funds have done better for their investors over the past five years.

Reverse your stats from Morningstar and you'll see that the Vanguard 500 Index fund outperformed 74% of all other funds over the past ten years and 58% of all funds for the past 5 years. This does touch upon an interesting point. By their very nature of following market indexes, index funds perform poorly during a bear market. This effect can be lessened somewhat by dollar cost averaging but only an actively managed fund has any hope of performing well in a bear market. But considering how many actively managed funds underperform the market long term it's usually not worth it to jump ship.

OF COURSE index funds go down in a bear market -- they TRACK the market -- but "underperform"? Not against stock funds! Throw every share of every stock in a pile and the performance IS the Wilshire 5000. Before expenses, all of the investors in all of the stocks earn the return of the W5000. As a group, the lower expenses = the highest returns. Individual pockets outperform the market, but there is an off-setting pocket that underperforms.

Can you pick the outperformer BEFORE it outperforms? History says you cannot. Picking funds that do not hold a large-cap, blended mix based on past performance gives the impression that, say, Growth Fund of America whipped "the" index when it wasn't playing the same game. Over the past 1, 5 and 10 years, Growth Fund of America was pounded by Vanguard's Capital Opportunity, PRIMECAP, Strategic Equity, Energy, Health Care and REIT Index funds. Growth Fund of America, of course, is not in the same class as any of those funds, nor is the Vanguard 500 Index. Camparing them is silly and choosing a fund based on past performance alone is insane. Mdbrownmsw 14:54, 29 June 2006 (UTC)

A common argument for active management vs. indexing is that active managers can try to avoid going down in a bear market. Yes, they can TRY. They might miss a bull market instead or otherwise do even worse that the bear. And, win or lose, it costs money to do it: money to pay the supposed genius running the fund, money as a profit for the owners of the fund company, transaction costs (for some suit at the NYSE to buy and sell stocks), taxes for realizing gains that otherwise would have stayed sheltered, etc.

Meanwhile, many of the stocks Vanguard's Index 500 fund bought back in 1976 are still in the fund, chugging along, paying dividends and/or growing, no transaction costs, no taxable transactions, no missing the bull markets...

Granted, it's boring. No one really goes around bragging that their fund tracked the market. My uncle sometimes spouts off about how well this, that or the other bet of his has payed off ("...nearly 25% last year alone!"). You only hear about his losers by remembering his past bets and asking specifically about them ("I had to dump it in March, it wasn't doing so well.").