The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: mcampbell on January 09, 2016, 09:47:07 PM
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So I'm in the process of getting rid of high expense ratio target date funds from my employer(which annoying eat most of the matching). I want to buy Vanguard, but more then 50% of my net worth is already in Vanguard indexes. Is there some danger of not diversifying what companies invest my money? There was some noise last year of tax issues with vanguard. I would hate to have a huge assessment or fee on all of my investments. Seems against diversification theory.
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OP, I've never heard of there being a significant risk to having all your stocks bought through the same company. You may not want to with a smaller company, but Vanguard has over $451 billion assets under management https://en.wikipedia.org/wiki/The_Vanguard_Group (https://en.wikipedia.org/wiki/The_Vanguard_Group). I imagine that would put it into the "too big to fail" category.
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I wouldn't worry about it:
http://forum.mrmoneymustache.com/investor-alley/vanguard-forced-to-raise-fees/
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OP, I've never heard of there being a significant risk to having all your stocks bought through the same company. You may not want to with a smaller company, but Vanguard has over $451 billion assets under management https://en.wikipedia.org/wiki/The_Vanguard_Group (https://en.wikipedia.org/wiki/The_Vanguard_Group). I imagine that would put it into the "too big to fail" category.
The 451 billion might be for just 1 mutual fund. They have over 3 Trillion in assets for everything combined.
I wouldn't worry about having all your investments with 1 brokerage firm, its having all your money in a few undiversified holdings that will cause you pain.
Lets use the Vanguard total stock market index fund as an example. If the Vanguard Group did go under[highly unlikely] that fund isn't going to disappear. It still has hundreds of billions of dollars invested in thousands of companies. I think the worst case scenario is that you would be buying that fund through Fidelity instead of the Vanguard website. The only way the fund is going to zero is either everyone takes their money out[unlikely] or every US business goes under[we have bigger problems].
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In Canada at least you are insured for something like $1M if Vanguard go bust or it turns out it was a scam ;-)
The only realistic theoretical risk is some synthetic ETFs which use derivatives to track eg gold prices - which could go weird in weird markets