Author Topic: So, why Vanguard?  (Read 9728 times)

netskyblue

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So, why Vanguard?
« on: June 15, 2013, 02:25:45 PM »
I'm not investment savvy.  I have a 401k now with Fidelity, and I'm very happy with how it has performed.  Since I've had it, 2007-present, no calender year has had a net loss, and gains have been good.  (Luck, and good fund choices on the part of my boss, who IS investment savvy). 

I'm looking at opening a ROTH IRA sometime in the mid-near future.  Everyone here seems so pro-Vanguard.  Why should I choose them, instead of keeping everything with Fidelity?

grantmeaname

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Re: So, why Vanguard?
« Reply #1 on: June 15, 2013, 02:39:11 PM »
Do that if you like. Fidelity has a fairly comprehensive and equally cheap line of index funds (the Fidelity Spartan series) that we discussed yesterday here. If you want to keep everything with Fidelity so all your investments are in the same place, that's generally just fine!

The appeal of Vanguard to me is that they're the low cost leader of the marketplace - it's what they do, and it's all they do, and they are continually pushing prices lower whenever they can afford to rather than occasionally decreasing their prices because they have to to keep up with the market. Costs are important because actively managed funds tend not to beat indices anyways, so the only way to take control of your investment returns is to take control of your costs.

Do you have an investment policy statement and an understanding of why you hold the asset allocation you do? It's a good thing to cultivate for beginners, and it's understanding that will be very valuable the next time we all get to experience 2008.

Another Reader

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Re: So, why Vanguard?
« Reply #2 on: June 15, 2013, 02:53:42 PM »
Vanguard is fine for index funds and their own ETF's.  As a broker, they are higher priced for trades for small accounts and the website is clunky.  I prefer Schwab and Fidelity, and they have the added advantage of bricks and mortar offices.  Fidelity and Schwab both have index funds with very low costs.  Because of the interest in indexing, there is a race to the bottom in the expenses of these funds.  Compare all three S&P index funds, for example.  On ETF's, you have to look at WHICH index they use.  IJS, the I-shares small cap value index, is tied to a different index than Vanguard's VBR.  IJS has performed better.  Fidelity also has a number of actively managed funds that have done very well over time. 


Khan

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Re: So, why Vanguard?
« Reply #3 on: June 15, 2013, 03:02:58 PM »
Why Vanguard? Because of vanguard's ownership structure. It's not stockholder owned like Goldman Sachs or Morgan Stanley, who are known to A: Sell bad products to their clients and do many other things to transfer wealth from client to broker or B: Trade stocks often in order to get more active management fees. It's not family owned like Fidelity, who does try to provide better services possibly because of that reason, but still wants to make profit.

Vanguard has a completely unique management structure. According to wikipedia: It's owned by the funds themselves. In a sense, getting an account with Vanguard means that Vanguard is answerable to you, not to people trying to get a piece of the pie. They extract only the money required from their funds to continue existing, and they're very good at it.

Basically, if you want to get index funds, the best are ranked kind've like this:
1. Vanguard
2. Blackrock/Fidelity/DFA
3.
4.
5.
6.
7.
-10
-20
-30
-Hell: G.S., M.S.

(D.F.A. is Dimensional Fund Advisors, they're only available through brokers, but are like a smarter take on Vanguard funds because they're not pigeonholed into following an Index, but the broker takes a cut to so it's harder to get into them. Blackrock owns iShares now which is a very good fund series, and from what I've seen of them, they work very hard not to be noticed and do provide better services for less costs on their funds).

netskyblue

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Re: So, why Vanguard?
« Reply #4 on: June 15, 2013, 03:41:39 PM »
Do you have an investment policy statement and an understanding of why you hold the asset allocation you do? It's a good thing to cultivate for beginners, and it's understanding that will be very valuable the next time we all get to experience 2008.

Mmmmm...no.  I do at least realize that's not good of me.  I can't even figure out how to find out what different fund choices I could change to.  I can open my account on the website and see what funds I have, and how much I have in each, but that's all I know how to do.  *cringes in shame*

arebelspy

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Re: So, why Vanguard?
« Reply #5 on: June 15, 2013, 04:18:21 PM »
This is why: http://jlcollinsnh.com/2012/09/07/stocks-part-x-what-if-vanguard-gets-nuked/

That being said, Fidelity is their strongest competitor and Fidelity has products that rival Vanguards.  It is thanks to Vanguard that Fidelity has been forced to offer these, but nevertheless, Fidelity is about Vanguard's equal.  I myself am looking to move some money into Fidelity.

There's 3 brokerages I would personally use:
Vanguard
Fidelity
Charles Schwab

In fact it is very likely (and part of my plan) to end up with accounts with all three institutions, for various reasons.
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Re: So, why Vanguard?
« Reply #6 on: June 15, 2013, 04:35:48 PM »
+1 to Arebelspy.  I have money at all three.  Great minds think alike (and so do ours).

arebelspy

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Re: So, why Vanguard?
« Reply #7 on: June 15, 2013, 05:08:12 PM »
Great minds think alike (and so do ours).

Hah.  I'm totally stealing that line.

I do feel like I could cut down on a lot of my posts by just waiting for you to post in the thread though.  Hmm..
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Nords

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Re: So, why Vanguard?
« Reply #8 on: June 15, 2013, 05:08:53 PM »
I'm not investment savvy.  I have a 401k now with Fidelity, and I'm very happy with how it has performed.  Since I've had it, 2007-present, no calender year has had a net loss, and gains have been good.  (Luck, and good fund choices on the part of my boss, who IS investment savvy). 
I'm looking at opening a ROTH IRA sometime in the mid-near future.  Everyone here seems so pro-Vanguard.  Why should I choose them, instead of keeping everything with Fidelity?
We've kept everything with Fidelity over the last 25 years.  When I took over my father's finances, I was glad that he's been there too so that I didn't have to learn a new set of policies on a new website.  And now our daughter's with Fidelity because she's comfortable with the website.

Another reason that she's with Fidelity is because she's in the military.  Around five years ago there was a perennial raft of complaints about not being able to access Vanguard accounts (let alone withdraw funds) from overseas.  You'd want to go with Fidelity & USAA for foreign access.  Maybe Vanguard has improved since then.

cats

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Re: So, why Vanguard?
« Reply #9 on: June 15, 2013, 05:10:16 PM »
I like them because they are low-cost, even if you are starting out with a modest amount of money (I opened an account while in grad school, so my beginnings were very modest!).  Currently, my 401(k) is through Fidelity, as it's the only option, while all of my "personal" investments (IRA, taxable) go through Vanguard--I currently just have a handful of index funds rather than individual stocks.  Interestingly, my Vanguard funds have all been outperforming my Fidelity 401k for the past 6 months or so (for things that are theoretically comparable, i.e., bond fund vs. bond fund, broad US stock index vs. broad US stock index), but I've only actually had a 401k for 6 months or so, so I have yet to figure if this is a consistent trend or not. 

grantmeaname

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Re: So, why Vanguard?
« Reply #10 on: June 16, 2013, 07:36:14 AM »
Mmmmm...no.  I do at least realize that's not good of me.  I can't even figure out how to find out what different fund choices I could change to.  I can open my account on the website and see what funds I have, and how much I have in each, but that's all I know how to do.  *cringes in shame*
Hey, that's okay. Start here to make one or at least get an idea of what it entails.

Mr Mark

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Re: So, why Vanguard?
« Reply #11 on: June 16, 2013, 08:44:33 AM »
Mmmmm...no.  I do at least realize that's not good of me.  I can't even figure out how to find out what different fund choices I could change to.  I can open my account on the website and see what funds I have, and how much I have in each, but that's all I know how to do.  *cringes in shame*
Hey, that's okay. Start here to make one or at least get an idea of what it entails.

+1

I prefer vanguard because of the shareholding structure and their awesome performance. But Fidelity is also good.

Fees are a killer of long term returns.

And I like the website. Easy to rebalance, us tax forms all done.

Big disadvantage - difficult if you are not American resident. One of the first things I did on arrival here was open a vanguard account! Felt like a privilege...