Vanguard Dips Toe into Private Equity

In February, low-cost index fund manager Vanguard announced plans to offer a private equity fund. This according to an article in Bloomberg. “The move represents a surprising convergence of two very different investing worlds,” the article states, noting the contrast between Vanguard’s reputation for keeping things simple (by offering low-cost index funds) and the inherent complexity of private equity funds–which typically include “opaque” portfolios that can keep cash locked up for years. Private equity funds,… Read More

Is Vanguard Getting Too Big for America’s Britches?

Fund manager Vanguard (AUM $6 trillion) has reshaped more than the rural Pennsylvania it calls home, according to an article in the Financial Times that discusses how the firm has reshaped the investment management world and raised questions about whether its girth warrants monitoring. Specifically, the sheer size of the firm and its “deepening control over the stock market could at some point become unhealthy.” According to the firm’s CEO, Tim Buckley, the company’s size… Read More

Investing Lessons from Vanguard

An article published on the Vanguard website earlier this month highlights takeaways from the 90-year history of the Vanguard Wellington Fund, the nation’s oldest mutual fund. The article, which describes Wellington as “a U.S. balanced fund that’s always held a carefully selected mix of high-quality stocks and bonds,” outlines the following three lessons for investors: ·      Management is a key component of the Wellington Fund’s average return of 8% since inception, the article explains, adding, “because… Read More

Vanguard Has Figured out How to Avoid Taxes on Mutual Funds

An article in Bloomberg reports that Vanguard Group Inc. has figured out how to avoid taxes on its mutual funds. According to the article, a review of Vanguard financial statements and trading data reflects that the firm “relies substantially on so-called heartbeat trades, which wash away taxes by rapidly pumping stocks in and out of a fund.” The mechanics are explained as follows: Vanguard attaches a more tax-efficient ETF to an existing mutual fund. Then… Read More

Higher Returns on Fewer Stocks: Vanguard Debunks “Best Ideas” Portfolio Philosophy

A recent study by a team at Vanguard contradicts the idea adopted by many investors and financial professionals that “broadly diversified portfolios are inferior to concentrated portfolios made up of a manager’s ‘best ideas.’ “ While the underlying premise might make sense—that performance of a manager’s most promising holdings would outperform those with a weaker outlook—the Vanguard paper makes an extensive and detailed case as to why the argument doesn’t hold up. Here are some… Read More

How the Fed’s Rate Hikes Affect Investors

A recent Vanguard blog addresses the issue of the Fed’s ongoing rate hike program and how it will affect investors. Here are highlights: “Higher yields on cash are good news for savers”—the article notes that since the Fed started raising rates in December 2015, investors have moved more than $60 billion into money market funds, and those inflows could rise with further rate hikes. Mixed outlook for bonds—”Bond investors might cringe at our outlook for… Read More

It’s Hard to Predict Bear Markets

A recent Vanguard blog discusses the challenges faced when trying to predict a market downturn. “While all bear markets involve a loss of investor confidence,” it says, “an assortment of factors can cause them,” including change in monetary policy, political events, and overvalued stocks. Even if you could predict such factors, the article argues, it’s hard to tell how they would affect equities. The article illustrates the differences between the last two bear markets—namely, the… Read More

Morningstar Survey Results for Long-Term Stock and Bond Returns

A recent Morningstar article outlined the intermediate-term (10-year) market return assumptions of a group of industry leaders that responded to a recent survey: John Bogle, founder of Vanguard: 4% stock return, 3% bond return over the next 10 years. Bogle asserts that “future returns from the major asset classes will be muted. GMO: -4.4% returns for U.S. large caps over next seven years; 2% real returns for emerging market equities. The firm, the article points… Read More

Combining Active and Passive Investing Can “Smooth the Ride”

A “partnership” of both active and passive investing can help smooth out some rough patches in portfolio performance, according to a recent Vanguard article. “The addition of a reliable investment partner—a broadly diversified, passively managed investment—can theoretically narrow the range of outcomes, helping you stick with a plan that offers the potential for outperformance while limiting the chances of significant underperformance.” Even the most skilled active fund managers, the article points out, will suffer periods… Read More

Vanguard’s Principles for Investing Success

Earlier this year, Vanguard published a whitepaper outlining the firm’s Principles for Investing Success. The forty-page report breaks down investing principles into four basic categories: Goals: Investors should create clear investment goals that are both “measurable and attainable. Success should not depend upon outsized investment returns, nor upon impractical saving or spending requirements.” Balance: Diversification is key in establishing asset allocations to avoid exposure to unnecessary risk. Cost: The paper argues that lower-cost investments have… Read More