TOPIC: Vanguard Mutual Funds

Anyone have their money in Vanguard (or not?).

Tell us why.

I've had the Vanguard S&P 500 for over 15 years.

It's great.

- Super low fees
- S&P 500 has mostly dividend yielding stocks so even in a bear market you still get some dividend payout every year
- I reinvest all my dividends so my net egg keeps growing
- Obvious the market is on an up run now so I am doing pretty well
- It's possible that the market may crash again like in 2007, but even then I lost 60% which quickly recovered within 5 years, and now I am up again

I gave a little money to an investment adviser
- It's good that I talk to him once in a while and learn about the economy and different financial instruments
- However he suck out $80 a month for advisory fee
- All the funds he investment in has a much higher fee than Vanguard
- He bet against the market in '07 and made tons of money for my friend, but now he is betting against the market again, but so far has done poorly
- Statistically Vanguard S&P 500 outperform 80-90% mutual funds, investment advisers

Can a Canadian invest in the Vanguard mutual fund?

Yo man. I used Vanguard. I have about $30k in there. My dad has been using Vanguard for a long time and highly recommends it. He has over $1m in there.

The best thing about Vanguard is the very low fees. Everything that SmoothOperator is true.

Every year that your money sits in your shitty bank is another year you're missing out on money you could have been earning.

You have to realize that if you're putting money in Vanguard, it should be for the long term. I recommend you read the book "A Random Walk on Wallstreet". It has sound investing advice and mentions Vanguard.

I am invested in Vanguard and I watched an interview with John Bogle on Wealth Track. He recommended using index funds instead of mutual funds because it’s cheaper for the investor. The Vanguard 500 Index fund is a great example. Do a little homework on what different funds cost.

What are the criticisms of Vanguard?

None really. Vanguard is not any better than other Index funds though. You can pick any index fund from any company just watch the fees. Vanguard is just better known, and has been in the Index Fund business for a long time.

Here's some downside to Index Fund

1 - Assuming in the long run the stock market may only be growing at 10% a year with all the ups and down. If the market has zero growth, there is a 50/50 chance that you will be down in 1 year. So even at 10% growth, in one year you still have a 45% chance that you could be down 10%, and 55% chance that you could be up 10%. I know the math is not super correct, I don't have time to think through it, but I just want to convey the idea. So basically the stock market can swing up and down very wildly. If I tell you to put all you saving in Vanguard S&P now, in one year, there is a 45% chance that you could have lost a lot of your money. That's a pretty high chance! And you are going to hate me. However, in 15, 20 years, most likely you will have made a nice chunk of money. If you haven't, the S&P still sucks, than the country is in depression and everyone else life is miserable anyway.

The main thing is this is the money you know for sure you will not need in the next 15-20 years. If you may need the money in 1 year. This is not the right investment. But this is true for any mutual funds/ETFs. You cannot be taking moeny in and how and try to time the market. Those are the guys that get screwed, and lose faith in Index Fund.

FYI - If you have your own company, you need to set this up in a pre-tax IRA such as SEP-IRA so you will not get taxed yearly.

2 - Certain small niche will do better than Vanguard S&P -
If you buy individual stock such as Apple 10 years ago.
A money manager that saw the crash of 2007 who short sell (go against the market) his whole portfolio
Gold, bond, real estate can occasionally perform better, but not in the long run as far as I know.

So, there are situations where other investments will do better than you, but it's luck, not that those guys are much better. Even if a specific money manager is truly talented, the chance of you picking the right money manager is still dependent on luck. Yea, so others many do better on occasion, and you gonna hate yourself. The downside is you don't get to brag about how good you are at picking stock.

3 - If you have your own business idea that you think you have a huge niche advantage, and you are still young. It make sense to put most of your money into your own business or maintain a cash reserve to give you the best chance to keep your business alive. So max out you Tax deferred IRA with Index Fund. Leave the rest in your business.

This thread isn't receiving the attention it deserves.

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My finance professor claims that mutual funds are garbage. He said monkeys throwing darts could do the same thing as mutual fund managers. There are decent ones that perform the same as the market but there are a lot of bad ones that under perform the market. Once you add in the fees then you are really not getting a good investment. If you look at historical data it pretty much proves him right. Mutual funds rarely outperform the market. Index funds are better IMO.

Good Looking Loser wrote: What are the criticisms of Vanguard?

I currently have no money in Vanguard Index funds.

From what I have read, and heard Vanguard is the gold standard for index funds. They have some of the lowest fees, there site is easy to navigate and provides some great information on each fund before you invest. So criticisms of Vanguard would stem more from criticisms of Index funds themselves then of Vanguard funds specifically.

I would look into cons of index funds. Off the top of my head some negatives I can think of and again this is so general that depending on what your needs are they may change:
1.Taxes (capital gains) , this depends on the fund type.
2. Length of time before you see an averaged return ( ~10%). Might take 10+ years to see an average of 10%
3. No one managing the fund but yourself and the markets. If the market starts tanking no one will be around to pull your money out, but you obviously.

Those are 3 major knocks on index funds. It really all depends but in generally if used properly and with the right intentions/goals there aren't to many knocks on index funds. They are one of the best ways to invest your money in the financial markets.

brissbrass wrote:

Good Looking Loser wrote: What are the criticisms of Vanguard?

I currently have no money in Vanguard Index funds.

From what I have read, and heard Vanguard is the gold standard for index funds. They have some of the lowest fees, there site is easy to navigate and provides some great information on each fund before you invest. So criticisms of Vanguard would stem more from criticisms of Index funds themselves then of Vanguard funds specifically.

I would look into cons of index funds. Off the top of my head some negatives I can think of and again this is so general that depending on what your needs are they may change:
1.Taxes (capital gains) , this depends on the fund type.
2. Length of time before you see an averaged return ( ~10%). Might take 10+ years to see an average of 10%
3. No one managing the fund but yourself and the markets. If the market starts tanking no one will be around to pull your money out, but you obviously.

Those are 3 major knocks on index funds. It really all depends but in generally if used properly and with the right intentions/goals there aren't to many knocks on index funds. They are one of the best ways to invest your money in the financial markets.

From what I have read index funds are still the way to go for long periods of time. 96% of mutual funds underperformed the market over the past 10 years. Plus the fees are higher with mutual funds. But there are some cons as you have mentioned. You could invest in an index and lose a lot at first. You really have to be planning to leave it in there for years to get a good return as you mentioned.

Why did you list the taxes as a con? I'm not arguing the point I'm just curious. What's the difference between taxation on mutual funds and index funds?