More and more investors are attracted to Vanguard’s extremely low-cost model. Several studies have shown that funds with lower expense ratios, as a group, deliver better performance than higher-cost funds—because investors keep more of their returns. Wall Street Journal Reports: “Assets at Vanguard Group climbed to $4 trillion for the first time, a fresh high for the index-fund giant. The Malvern, Pa.-based firm pulled in roughly $49 billion in net new money in January, according to preliminary numbers from a spokeswoman, boosting its assets under management to the new firm record…. Vanguard’s rise is largely the result of a rush by investors to embrace lower-cost index-tracking products such as exchange-traded funds. Vanguard executives said in a client webinar early this year that the firm had received ‘unprecedented phone volumes’ but that it doesn’t trade cost for service. Vanguard, which has a staff of about 15,000, hired more than 1,700 new full-time staff members last year and said it expects to hire a similar number of new ‘crew members’ in 2017.”
The trending to switch to low-cost index funds from actively managed funds is getting bigger and bigger every year. With more money pouring into Vanguards, the fund fees will be even lower, and that’s a good news for investors like you and me. The net money inflows at Vanguard in 2016 topped those of all of its rivals combined, and this year is going to be even better. According to Morningstar, $289 billion or 54% of the $533 billion of net flows into all mutual funds and exchange-traded funds last year went to Vanguard funds.
Vanguard is getting more popular as a result of a push to embrace passive mutual funds that mimic broad indexes for a fraction of the cost of the traditional active mutual funds. We should thank John C. Bogle, founder of Vanguard Group, in his quest to help regular people getting their fair shares from wall street.
One of the downside of the record of $4.048 trillion in assets for Vanguard is that the wait times for support are getting longer. Vanguard is hiring more staff members to relieve these unprecedented phone volumes and to improve customer service. Overall Vanguard, as a leader in low cost, is one of the best place to invest your money.
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