Not mentioned in any of the coverage I've seen (or the interview with Vanguard's new CEO in the WSJ) is Fidelity.
Fidelity used to be known for actively managed funds, but has been eating Vanguard's indexing lunch for the past 10 years or so. Part of this relates to its dominance in workplace accounts, but Vanguard hasn't helped itself with some bad customer-facing software updates and a perception that its service levels are poor compared to Fidelity.
Cutting fees helps, but Fidelity has shown its willing to do this, too, including no fee "Zero" index funds: https://www.fidelity.com/mutual-funds/investing-ideas/index-... (note Fidelity is very clear about who it's competing with)
One other differentiation that Vanguard has is that it is owned by the fund holders
“Vanguard set out in 1975 under a radical ownership structure. Our company is owned by its funds, which in turn are owned by Vanguard’s fund shareholders. We focus on meeting the investment needs of our clients.”
So in short, vanguard is customer-owned, where fidelity is owned by mostly the founding family (the Johnson’s).
https://corporate.vanguard.com/content/corporatesite/us/en/c...
But does that structure confer any realistic chance of voting control by any real humans who aren't already employed by vanguard?
Funds aren't known for being voting activists.
Even so, I think the incentives are still for the Vanguard management to make as little profit as possible so that they can compete and have more funds under management. Controlling more billions of dollars of stock shares is kind of its own reward and brings many opportunities for enrichment, and if they don't have to worry about making money for shareholders, they can pretty much always engineer the lowest fees.
Yes, in theory the fund-owned structure should mean they can charge lower fees than profit driven competitors. However, if competitors are doing things like zero fee funds as loss leaders, or have a banking side to diffuse costs, then it gets less clear.
Even if you don't touch a dime of it, "had $X million in funds under management" is good for your next job. In business better to be the CEO of an ailing billion dollar business and drive it into the ground than actually do a good job managing a firm 1/10th the size.
Starting end of Nov 2024, Vanguard is actually beginning to roll out proxy voting capabilities to fund holders (in the US). This looks to be the beginning of deeper proxy voting capabilities, but not much information out there yet.
https://corporate.vanguard.com/content/corporatesite/us/en/c...
Would you rather be a dairy cow on a farm owned collectively by the dairy cows, or owned by one billionaire family? Is it that hard to see how that's immediately a huge positive even if you can't identify individual instances of the billionaire abusing their position?
Agreed. If you feel that your company is a good forward-looking investment for whatever reason (appreciation/dividends), it doesn't hurt to keep some holdings--from RSUs or otherwise. Though with transaction costs what they are somewhat per this article/discussion, the right question should probably be "If I had the money in cash, would I buy these shares." Employee stock purchase makes things a bit more complicated depending on the exact terms. Post dot-bomb I got a lot more conservative in terms of holding company stock from RSU/ESPP after a decade with a couple of private firms which doubtless cost me some money but I think I took a reasonable approach overall.
Bad analogy. There are many dimensions in which my experience as a dairy cow may be affected by ownership.
In the case of an investment fund, there's really just customer service and rate of return. If I have a good experience in those dimensions, why should I be concerned with ownership structure?
This is academic. I have equal control over both, which is to say none whatsoever. Capacity to influence a company falls to the following (in order)
1. Executives
2. Large shareholders (usually institutional and rarely individuals)
3. Customers
4. Employee unions (if present)
The tech industry is an anomaly where 1 and 2 largely overlap, but this is not true in most industries. Unless you are super rich, you will never be able to have more influence over a large company than you do in the role of a pissed off customer ready to take his money elsewhere.
This alone is why I will always choose Vanguard if possible.
TBH, I trust vanguard more, even if their website is absolutely worse. There's a saying, 'if you're not the customer, you're the product'. I expect trades on those index funds are getting 'front run' much like robinhood is getting front run. You might have a lower ER but your nav might effectively be higher when buying and lower when selling.
Of course, I'm a 'buy and hold' investor so this doesn't really effect me much, but it's the principle of the matter.
Fidelity uses those funds as marketing, and they make up for it with all the other services and funds they offer. It's intentional, and it's working.
Vanguard is more and more becoming a group that just wants to run ETFs and if you want to use them, they're making it harder and harder. They recently dumped all their 401(k) and similar plans from being in-house to some other provider.
Saves costs, makes support annoying.
Of course, you can use a Fidelity account to own Vanguard ETFs if you wanted.
> Fidelity uses those funds as marketing, and they make up for it with all the other services and funds they offer. It's intentional, and it's working.
> Vanguard is more and more becoming a group that just wants to run ETFs and if you want to use them, they're making it harder and harder. They recently dumped all their 401(k) and similar plans from being in-house to some other provider.
If this is true, then it must for individuals.. My company moved a little over a year ago TO vanguard for 401ks
It was only for solo 401ks and small business with less than $20M in assets.
Thanks for the reminder to move some old IRA accounts they dumped onto some random provider to Fidelity.
Horrible move on their part, if I didn't want some provider diversification I'd just move everything over entirely at this point.
>Of course, you can use a Fidelity account to own Vanguard ETFs if you wanted.
Which I would highly recommend if you ever want to change brokers. the fidelity ZERO products are great but can only be held at fidelity while VOO shares can be transfered to any broker.
I presume the main advantage of transferring shares is to avoid taxation on realised gains. Secondary is to avoid transaction fees?
I sold and bought recently (because transfer looked like paperwork hassle to me): had a small transaction cost, and the main disbenefit was losing transaction history e.g. buy date was now reset; it was tax neutral for me either way.
Vanguard is still offering IRAs last I checked.
It's not clear to me exactly what they have moved, but two of my (very old) Simple IRA accounts got forcefully moved without my approval, and a 401k rollover into a self-managed IRA is still around. Not sure what the difference was exactly.
https://www.ascensus.com/about-us/press-room/news/ascensus-t...
This post was a reminder to get those moved out of Ascensus into Fidelity if possible.
There’s not really much money to be made front running someone’s deposit into an index fund that’s gonna sit there for the next 40 years. It works on RH because generally those users are transacting much more frequently and in much less liquid things like options.
Front running customer purchases is not the concern. In the running of an index fund there’s many levers you can pull to create revenue streams that don’t show up on expense ratios.
Funny business can absolutely be pulled during rebalancing.
Another big one is securities lending income. Vanguard pays that out to investors which effectively creates negative expense ratios in certain funds. Index funds from other issuers don’t necessarily share that securities lending income with customers.
It's not about front-running investments _in_ passive index funds, it's about front-running investments _by_ passive index funds, which, of course, ultimately comes out of the investors' wallets.
As a practical matter, since dealing in mutual funds' shares is settled after market, "front running" these transactions would be problematic. (Impossible, I'd say?)
I trust Fidelity. I used to work there years ago. It is a conservatively run place, careful with changes, which is a good thing when managing large amount of money. The tech and web interface might not be the shiniest, but I'd rather have my money there than vanguard/schwab, etc...
How do you front run a mutual fund? The price is the price.
If you know the index rules, it's fairly simple to calculate the turnover it is going to generate when it rebalances and subsequently the impact the rebalance is going to have on prices. This is a fairly well known behavior and a lot of players have been doing this for a long time. Basically every index of any significance is already being monitored and rebalancing effects are "front-run" this way.
I put the word in quotes, because this is a perfectly legitimate way of front running. The major indices are all public, and anyone can take a crack at this. In other words, if I announce to the world a month in advance that on a specific day and a very specific time of the day (at the closing auction) I'm going to buy X amount of specific stocks and sell Y amount in other stocks, I can't blame people for using that information against me.
Yeah duh. I was explaining to the parent.
How do you front run a mutual fund?
as a "consumer" of the mutual fund, you can't.
but the mutual fund itself makes large trades: somebody downstream executing those trades or having access to that data could front run.
You mean an index fund?
Wouldn’t index ETFs be index funds that are not mutual funds?
Yeah but you can front run a (active) mutual fund
Predict or react to index changes faster than the funds that are compelled to follow the index.
But you can't front run shares of mutual funds; they always trade at close of business at NAV.
You could potentially front run ETFs, but if you're worried about that, you can use limit orders and get the price you want or not transact. As long as you use a competent broker that offers limit orders.
Investopedia disagrees:
> A form of front-running in index funds is common and isn't illegal.
> Index funds track a financial index by mirroring the index's portfolio. The composition of the index changes periodically to balance it accurately as the stocks that make it up change dramatically in price or as stocks are added or removed from the index. That forces the fund's managers to buy or sell some components of the index.
Front running is illegal.
In finance, nothing is illegal if the profits outweigh the fines.
Citaldel paid handsomely for order-flow information from Robinhood. They made a lot of money off retail traders. They paid a fine IIRC equivalent to a few day's profits.
PFOF isn't (typically) illegal, a better word might be "controversial". There's nothing free in this life: the zero commission brokers are making it up somehow.
While the studies on how PFOF effects execution quality are varied, this summary [1] from Wharton seems fairly balanced. It's not as simple as citing NBBO and moving on.
Personally I'm suspicious of the practice mostly because of the pretty clear conflicts of interest that it creates. Again, this is controversial, but the people arguing it's ok are for the most part making money from it.
[1] https://wifpr.wharton.upenn.edu/uncategorized/research-spotl...
PFOF is not front running. Market making is not front running. Full stop. This fact is only controversial if you fundamentally misunderstand what market makers do.
There's a lot of confused comments on this thread. "Front running" in the strictest sense means illegal trading that involves taking advantage of trades that you know will happen and you have a responsibility not to exploit. "Front running" is also used informally to mean legally trading prior to trades that you anticipate happening. Studying the rules of an index and buy a stock just before its added to the index and index funds are required to buy it is "front running" in the second sense.
Isn't it just PFOF? Is that actually illegal?
Edit: No, it's not in the US at least. It mostly just allows the broker to internalize orders if they prefer.
Only if you get caught. And the fine needs to be higher than the profit.
Considering someone or some activity to be criminal, and accusing them of being a criminal, are two completely different things.
I consider most financial institutions to be criminal because it is always their clear intention to circumvent the spirit of the law as closely as possible. The intention is to reap the benefits of breaking the law, without the risk of consequence. When the pitchforks come, these are going to be the criminals being chased down the street.
By the same token, I do not consider a parent who writes a bad check for groceries to be a criminal.
The illegal 1.5 is always the optimal game theory choice because the chance of getting caught is not 100%
Only if they're mutually exclusive.
The riskier the road, the greater the profit.
I trusted Vanguard more until they became a broker and forced all their fund customers to have a brokerage account with them.
The pennies that they scalp off you on the trade by "front running" the order is much less cost than the annual fee if you are a long term investor.
You expect wrong. I think you're talking about Payment for Order Flow (PFOF) which Fidelity does not use.[0]
[0] https://www.fidelity.com/trading/execution-quality/overview
I don't think vanguard's core customer base cares about what hungry competitors are doing to entice them to move. Just look at Robinhood: they offered the biggest financial incentive for users to switch of any broker in the industry and I doubt many vanguard customers took them up on that. Stability, trust, and low fees are all buy and hold investors at Vanguard really care about.
They only offered it for a month or 2 and pulled it pretty quick
I have accounts at both, and my perception is that Vanguard is pretty much exclusively low cost, but Fidelity does have some very competitive options if you can find them. They just also have a lot of overpriced junk.
Fidelity’s technology and customer service does generally seem better. Although they were completely baffled when their app refused to run on a rooted phone with an error message along the lines of “your account is frozen” after I logged in. (It wasn’t, and worked fine after I realized that was the issue and put it on the deny list.)
Overall, I trust Vanguard more, but both have their strong points.
The overpriced junk is wedged into bespoke employer 401k programs that are managed by the brokers. There is usually only one or two low fee options hiding in the list and you have to be savvy to find them. Most employer 401k programs suck because they (custodian) are agreeing to the fund composition based on price to them. If you are lucky you might not end up in John Hancock or Transamerica. Yuck!
Matt Levine has a bit about the best customer service your broker can provide is not picking up the phone in a crisis.
Bad UX is, intentionally or not, consistent with Vanguard's long-term index investing philosophy. Call us? Use our website? Whatever it is you are trying to do, you probably shouldn't be doing that.
I kid, but only a little.
It's interesting everyone's saying the UX is bad. I've had consistently good interactions with Vanguard's support over the years. I regularly get to talk to an actual human without waiting more than 10-20 minutes, and they're very helpful about getting things done and giving even basic advice about tradeoffs in different investing options.
The website isn't amazing, but I don't feel like it's terrible either. There's much worse 401k/IRA providers out there.
It’s hard to beat Fidelitys offer right now. They give you a 2-3% checking account. A 2% cash back credit card, access to their low cost funds and a decent enough website. All in one place.
Other brokerages are better at their niche but the fidelity package is quite competitive
Fidelity has great features, but is hamstrung by their awful execution.
The app is clunky, slow, and looks like something from the 90s. Just logging in takes an average of 10-15 seconds. The credit card is serviced by Elan, who is awful, but aside from that, the UX is abysmal. It feels like it redirects no less than 8 times to get to the credit card page. My phone won't even load it, so I have to do it on my computer.
It's so frustrating to me because I feel like they're 90% of the way there and just need a bit of UX work. But I've had that feeling for years now, with no real progress made, so am slowly moving away. If you don't touch your money often, it's probably fine - great even, but it became too frustrating for me in the end as an everyday use account.
Good to know that Elan services the card and is terrible. I’ll avoid
I've had to replace the card once or twice for various reasons and never had any issues. It's a good enough offer that I'm not likely to jump through hoops or create some big other account to improve on. I'm not down to a single account but I've simplified things and diversified.
I used this card for a few months before usbank launched their smartly card, at which point I moved 100k from fidelity to a usbank IRA and now enjoy 4% cash back.
Isn't this about the funds, rather than using Vanguard as a broker? Can't you buy Vanguard funds while on Fidelity, or vice versa?
You can. There's usually a hefty transaction fee when purchasing a funds not managed by whichever service you're on ($49?).
Might be manageable if you're purchasing in enormous quantities; but a 5% fee on $1000 hurts if you're in normal consumer purchase ranges.
This is true for mutual funds, but Vanguard ETFs are available on Fidelity with no fees.
One benefit to Mutual Funds is that you can do things like reinvest dividends, or investment plans. It's not a fundamental advantage that a mutual fund has, but no brokers that I am aware of would let you do those things with an ETF. So if you have long term "forget it" account, with ETFs it will accumulate cash from dividends. And the tax benefit of ETFs doesn't really help in a tax advantaged account (e.g. retirement). Finally, theoretically at least, when you buy an ETF there is an explicit "transaction cost". Even when they don't charge you a commission, there's a bid ask spread. Mutual funds trade at NAV both ways (unless of course there's an external transaction cost separately disclosed).
It used to be you could buy fractions of a mutual fund, but not ETFs. Recently, brokerages have started allowed you to do fractional ETFs as well though.
There are some minor advantages to funds left, especially in taxable. Some of the funds do their best to allocate certain costs to the ETFs so that ends up more favorable tax-wise.
The real main advantage of funds vs ETFs is they don't bounce around in price every millisecond.
We tried using vanguard. The UX/UI was so bad we went through the work of transferring everything to fidelity. They've got a pretty decent app.
Vanguard has so much friction on what should be very simple and common tasks.
There's no excuse for that. I can say pretty confidently that cutting fees won't be enough. They need a total rewrite of all their customer facing software and web stuff, and they probably need to revamp their customers service as well. They screwed up my wife's name and she tried for months and months to fix it before giving up.
Vanguard recently made two horrible mistakes: 1. a typical "Grand UI Redesign" that made the site worse and removed a bunch of previously working features, and 2. They made all their users "migrate" their accounts from one type to another, a process that I found to be error prone and clunky.
For 1, all of us software people have seen companies do this over and over, and it always sucks. For 2, why they couldn't do whatever backend migration they needed to do without having it disrupting retail customers, I have no idea.
Both of those point to a software organization way below where it needs to be competence-wise.
Vanguard's grand UI redesign was poorly done. At the time each team was responsible for some software product, and had a good ownership model. The issue imo was that the internal UI component library was poorly made and funded, and that the UX team was very old (most of the people were lifers that were hired in the 90s, no real experience in UI/UX,etc.) So people were just making the designs they were given. The Grand UI Redesign was a single new team that just made a heavy Angular UI application for the major areas, forcing product teams to be backend only. This caused discontinuity and didn't really fix the core issue.
I've had the same Vanguard accounts for 15 years (Rollover IRAs, Roth IRAs, non-retirement) and I don't remember having to migrate anything. If something was migrated, I wasn't even aware it happened.
That's because Vanguard is a buy and hold philosophy. They have previously stated that they designed their site for the bulk of the users. Those users log in just to check their balances in the 5 or fewer funds/ETFs that they hold. So instead of building something that would be reasonably easy for everyone, they built something that was easy for their primary (aging) user base. It's the same sort of mentality how they don't allow inverse ETFs, they aren't going to offer any crypto related stuff, etc.
At some point you need to realize your gains—perhaps to rebalance a portfolio, or to pay for an expense, or because you’re retiring and now it’s time to enjoy the profits of your buying and holding. And a lot of people elect specific-lot cost basis accounting to minimize tax burden.
The “tool” was sorting your lots by cost basis, which is what Enginerrrd is saying was taken away.
They can't even correctly donate from a Vanguard brokerage account to a Vanguard DAF without breaking the cost basis.
> They need a total rewrite of all their customer facing software and web stuff,
They've done that. And now you can't sort by capital gain/loss per share when picking lots to sell.
They're also almost done forcing everyone into the brokerage side, which is less flexible with some things like reinvestment of dividends. On the nice side, it includes foreign dividend info on the 1099s so you don't have to find a separate document to get those percentages.
The idea of making financial decisions based on UI/UX is extraordinary to me.
It is to me too! I would never do that normally. It's just that it was THAT bad.
It took me MONTHS to figure out how to sell a particular fund to buy another one. Somehow every time I tried to do it, it failed. I kept coming back to it over and over and different things went wrong. It was also very difficult to figure out the status of an order.
It was literally that clunky, and I've been trading for decades. I run multiple businesses, I know how these things work, but their UI was awful.
This particular one was only a few thousand dollars worth, and so the issue just never reached a high enough priority for me to invest the time to call ciatomer service.
I just kept checking it once in a while when i had a few seconds to spare.
I guess you’ve never had the displeasure of using treasurydirect.gov.
Do you like radio buttons? I hope you like radio buttons.
Even if the thing that you're using for really, really shouldn't be a radio button.
Vanguard's website revamp in the past three years was disappointing because in the past, I can visit just one (landing) page and get almost all of the info I need about my holdings + actions I could take on them and my accounts. Now, I have to click through a myriad of pages to do what I want. Plus, in Firefox browser at least, if you want to 'Exit' the order and some other pages, it simply doesn't work, so I have to type the 'vanguard.com' in the browser's URL field and ping it again.
This is an example of not breaking what was not broken (or at least, keep most of what was useful instead of replacing everything with "new and cool" stuff just because <no reason?>).
> Vanguard's website revamp in the past three years was disappointing because in the past, I can visit just one (landing) page and get almost all of the info I need about my holdings + actions I could take on them and my accounts.
Bookmark https://holdings.web.vanguard.com/
It's so bad. I don't even like logging in anymore. Padding/whitespace everywhere, no more alternating row colors. I despise mobile-first UIs. The old one many have looked dated but it was more information dense without being overwhelming.
RE: Fidelity Zero
The downside, as I understand it, is that Fidelity Zero doesn’t offer ETFs, and that the Fidelity Zero mutual funds can’t be transferred to other brokerages. Depending on your preferences their expense ratios might justify the vendor lock-in, but Vanguard ETFs are hard to beat IMO.
I tend to only use the zero funds in tax advantaged accounts. Primary example, I needed to move an HSA to avoid a $20/month fee from the idiots at Health Equity when I switched jobs. Moved it immediately to Fidelity since they offer an HSA account and used the zero funds.
If I were to ever need to move the HSA money elsewhere, they can sell the funds to transfer, since it's not a taxable event, that's fine by me.
I won't buy the zero funds for my brokerage account though, I stick with Vanguard ETFs.
I wonder what the tax efficiency looks like when comparing a zero fee fund to its low fee ETF counterpart. Is it possible an ETF under 5 or even 10 basis points is still a better deal if it's tax efficient (taxable accounts only)?
Fidelity's "Zero" funds are great, but only for specific scenarios IMO. They can't be held outside Fidelity accounts, so what happens if you get caught up in some KYC nonsense and Fidelity closes your account? Are you forced to liquidate and incur capital gains? There are also some embedded tax efficiencies inherent to ETFs, like 351 exchanges, which aren't popular now, but may become popular in the future. TBH, this mainly applies to taxable accounts. For nontaxable accounts, Zero funds don't have much downside.
> They can't be held outside Fidelity accounts, so what happens if you get caught up in some KYC nonsense and Fidelity closes your account?
This literally happened to me. I'm banned from Fidelity for some unknown (AML presumably) reason but have no other issues with any brokerage, bank, or exchange.
Fortunately I just held a bunch of ETFs, so it was straightforward. But it does happen.
The zero fund I am familiar with (FZILX) has a once-a-year dividend schedule which I'm sure nets them a lot of money, vs paying out more frequently. If you want to unload, you can only do it once a year without throwing away your earned dividend.
That's not how dividends work.
Dividends are built into the NAV price. It just becomes taxable income when it is paid out.
Nevermind, it looks like baking cleared up my misconception in another reply.
I'm waiting for negative fee funds that delivers better than indexed returns by loaning out the shares to shorts.
Many funds do make revenue with share lending. I don't know that there's enough lending to get expenses below zero, at least as of yet, though.
Also, sometimes the lending revenue is just added to the fund, rather than being used to offset expenses. The end result is the same, but the accounting numbers look different.
As a result, when comparing two index funds that track the same index, you should look at actual total returns rather than quoted expense ratios.
I started using E-trade because of this instead of transferring my vested stock to Vanguard. Already had an account so it was zero effort to convert to my usual funds as ETFs which has the bonus of being transferable between brokerages unlike mutual funds.
You can frequently do in kind transfers of mutual funds, particularly between the big funds and brokers.
You can’t for funds that are only available at a single brokerage. This describes a lot of index funds and wrapper funds.
The big index and wrapper funds at vanguard you absolutely can.
> convert to my usual funds as ETFs
Do you mean that you sold mutual funds at Vanguard, and used the cash to buy ETFs at eTrade? This means you had to pay tax on capital gains, right? Or is there some trick I don't know about, vis-a-vis converting mutual funds into equivalent ETFs, without a taxable event?
Many Vanguard mutual funds offer ETF as a share class of the fund. For those funds, shares in the traditional share classes can be exchanged for ETF shares, if you hold them at Vanguard.
But not all of the funds have an ETF share class. And if you hold Vanguard mutual funds elsewhere, you'd need to transfer them in-kind to Vanguard to convert.
The funds come from selling stock as it vests. Stuff already in Vanguard stays there until I feel annoyed enough to move it.
Yeah, as a litmus test of how much they care about their customers try to call in and get something done.
Vanguard will throw you into an automated labyrinth with the only exit being a poorly-trained rep in india or pakistan that has no real understanding of what you're trying to do.
Their website is complete trash compared to the other big two. Often down, you can only check your balance, etc.
Fidelity will within a matter of a couple of minutes connect you with someone that seems too good to be true. Knowledgeable, friendly, going out of their way to help you, they follow up on what they say (like calling you back, etc).
Once I got a taste of how Fidelity treats people and their broader set of products I moved everything over.
Vanguard is circling the drain if you ask me.
I'm wondering if I'm on some very different account/plan than everyone else. Any time I've ever called Vanguard, I've gotten a super well trained rep without much of a wait or a call tree. I also had good interactions with Fidelity when I used them.
Were you on a plan run through an employer? Or individual?
It might be related to how much money you have invested. They publish a list of levels that provide different levels of service. https://investor.vanguard.com/client-benefits
The breakpoints are $50k, $500k, $1M, $5M.
Also, that page seems to be talking about like... financial advisor services. Most of the time I was just calling in to ask for help rolling over a 401k or something. I don't think I've ever called for actual investment advice of the sort that they seem to gate behind certain account sizes.
I'm wondering if it's something where company-sponsored plans sometimes have bad CS support because their support contracts are paid/arranged separately from if you just have a personal account. Or if some company plans have better support because they pay for it?
It's really annoying that people here are talking about "Zero" fee funds as if they were zero-fee funds. As far as I can tell "Zero" means less than 0.05% fees.
No, zero means a 0% expense ratio and no minimums, as listed for the four funds at the top of https://www.fidelity.com/mutual-funds/investing-ideas/index-.... Unlike most other funds, these are captive to Fidelity so if you ever do an ACATS transfer they have to be liquidated.
That's the key, though if it's a tax-advantaged account it's not a major issue (as you can just transfer to an appropriate ETF and then ACATS that).
In taxable it could cause you to have to stay with Fidelity or eat a tax bill.
It's an interesting reversal and highlights the power of competition - as a young part-time employee in college, my employer automatically contributed a few hundred dollars for me to a 403(b) type of retirement savings account. Fidelity was the custodian and after I left the job, it imposed a substantial monthly fee that eventually ate all of the money in the account, leaving me with zero. I always remember that episode when dealing with Fidelity.
FWIW, I’ve hd excellent customer service / support experiences with Vanguard - and the opposite with Fidelity.
and Vanguard keeps fading the crypto vote, and Fidelity is the exact opposite
everyone can vote with their wallet
I'll be contrarian. The general wisdom is hold the fund with the lowest fee structure.
However, if the fee structure is 0.07%, that's $70/year / 100k invested. Even if it's 0.44%, you're talking about $440.
The fees on most funds are small enough now to not matter much. It's worth shopping for lower-fee funds, but the more you go below 0.5%, the less it matters. If I save $500 per year for 50 years, that's $25k+interest, which is kind of the breakpoint of where it has practical impact on e.g. when I can retire.
For index funds, the important measure is the tracking difference [0] anyway. While the costs contribute to it, different ETFs on the same index differ in their typical/historic tracking differences beyond their differences in nominal cost.
[0] https://www.morningstar.com/business/insights/blog/funds/etf...
With 7% interest it’s over 200k.
Sure but that’s an order of magnitude above the numbers the parent is comparing? A 7% fee is certainly crazy, agreed with you there
guntars did the amortization on $25k growing with interest (not fees). In other words, the claim is that 0.5% can be significant. Which is true.
When I did the math with my life savings, 0.5% was about the breakpoint where things become significant. $200k would be more significant, so I suspect when I did the math properly, I was expecting to retire in less than 50 years. In 50 years, I'll likely be dead.
Ah I see, the 7% yearly interest on the 0.5% fee can add up to be significant. That is a good point, good job @guntars
At %0.07 you would lose about 2% of your total value after 30 years.[1] No thanks.
[1]https://www.bogleheads.org/wiki/How_much_do_you_lose_to_annu...
2% over 30 years is inconsequential. At an average rate of 7%, that mean you'll grow your investment by 759% over 30 years instead of 761%.
Your math is way off. It's not merely 2% of the initial investment, but your final overall wealth.
That is the average. Many of them are just 0.03% or 0.04%
... of the original value, ignoring growth, dividends, and inflation.
I agree that minute differences don't really matter. E.g., 0.09% vs 0.07%; who cares. Differences as large as 0.5% are much more material in the long term, though.
Agreed. I'm looking for non-financial features at this point. Vanguard supports FIDO hardware keys and Fidelity doesn't.
I'm not storing my retirement funds in the latter.
Unless you have some super special edge, Vanguard is really good IMO. Having a 0.01% or 0.05% fund is really as good as you can do and never pay attention.
Vanguard also has things like the VIGAX (0.05%) and the VITAX (0.09%) with excellent returns over the past 20 years.
You could also actively invest, where you can get lucky, but if you have a day job... it gets tougher.
edit: also you could do "better" with lower fee funds, but they typically dont match the performance over the time period, and fidelity is a recent entry for their funds.
actively investing is 1) hard and 2) really just a waste of time considering the amounts most people are dealing with. I think it may have been from A Random Walk Down Wall Street but the general notion is something like this:
You have a 500k portfolio, and you spend the average amount week managing your portfolio (12 hours). If you were to achieve a 2% alpha (which is considered insanely high for any actively managed fund, and almost impossible to replicate year after year), you have made an excess $10k over what you would have made investing your portfolio in a benchmark.
On an hourly basis that's about $16 per hour spent... you could get more reliable income working at a gas station in California. And of course, most people are not investing $500k, the vast majority of day traders are probably pulling their hair out managing <$100k...
The counter is smaller returns are easier for small investors. If you are a large investor just the act of buying stock changes the price.
Straight from the source: https://corporate.vanguard.com/content/corporatesite/us/en/c...
Someone correct my math here, but if they have 10 trillion in assets under management and the management fee is 0.07% then that's still 7,000,000,000 or 7 billion in fees every year?
Not bad
Indeed, that is about the stated revenue on their Wikipedia page. Divided equally among their 20,000 employees, that comes to $350,000 per employee. Expenses like office space, taxes, fines/fees, inflated executive compensation, etc will bring that down quite a bit; though other sources of income will bring it back up too. Sounds reasonable.
I wonder what 20,000 Employees are doing there though. I know saying "I could do that with 10 people, what are they even doing" is a meme here, but I really can't make a good guess what the employees are actually doing. Risk assessment, looking for new investment opportunities, regulatory paperwork, marketing? 20,000 is a lot of people.
How many people is ideal to look after $10,000,000,000,000 in assets? Some bloat is definitely necessary at these mind-boggling numbers, and assets-per-employee is still half a billion.
One way to get a hint at what kind of work employees do is by looking at open job postings: https://www.vanguardjobs.com/job-search-results
Nice link, thank you!
I imagine they have actual customer service. But maybe I'm naive?
Right, you are hinting at the angle that other commenters have pointed at, which is that Vanguard runs a fund management business (which is what the article is about) but also runs a brokerage, does 401k/403b/529 administration, has an advisory business, etc. The total employee count refers to employees working across all those business units, and that includes a lot of customer service, regulatory, back office, etc.
Vanguard is also a broker.
Interesting. That would put their budget higher than the bottom 10% of state budgets.
Indeed, that's the reason why they can afford to reduce the fees. Index managers are not charities after all.
Revenue, not income.
That only applies to US funds, but not in the UK ones which continue to be significantly more expensive...
My broker doesn't show fee on some of the Vanguard instruments, but e.g. the S&P 500 UCITS ETF (USD) has 0.08 % listed as fee. Which ones are you looking at?
VWRA (all world UCITS) probably the more famous one charging 0.22%, while the closest corresponding US ETF VT (total world) is just 0.06% (dropped from 0.07%)
How does AUM compare between the two?
FTSE All-World UCITS ETF (VWRP) has 0.22%
Vanguard FTSE Europe ETF (VGK) is only 0.06%
How do those compare to average expense ratios and fees in that market?
Article mentions their bond funds getting the most dramatic cuts — they didn't list specific symbols though.
Anyone know off the top of their heads which funds specifically? Thinking I need to move away from being so stock-heavy.
The full list is at the bottom of their press release: https://corporate.vanguard.com/content/corporatesite/us/en/c...
Lots of small reductions to the specialty bond funds. VCIT and BIV (Intermediate Term bonds) moving from from 0.04% ==> 0.03%. One notable drop is with VWOB (Emerging Markets Government Bond) going from 0.15% to 0.1%.
> they didn't list specific symbols though.
rule of journalism: never quote the original news/article source
rule of financial journalism: never list the ticker/wkn/isin that would make the article actually useful
Rule of legal journalism: never link a PDF to the actual court opinion/decision . . .
Rule of science journalism: never link to the paper.
Bonds kind of fell of my radar for a while. What are yields like now?
4-5%
I'm a big fan of Vanguard, but if anyone is looking for competitively-priced funds from other issuers, check out
- iShares Core (Blackrock) https://www.ishares.com/us/strategies/core-etfs
- SPDR Portfolio (State Street) https://www.ssga.com/us/en/individual/fund-finder
- Schwab Select (includes in-house and third-party) https://www.schwab.com/research/etfs/tools/select-list
Which of these do you use personally?
A mix. For a given asset class I look at expense ratios and underlying indexes.
Fees are good but I am concerned about too much correlation in the markets, caused by index funds. Basically everyone holds the same assets.
Any imbalance should be easily exploitable by market players, so I would think it should be self-correcting.
Also, worldwide there are quite different preferences in which indexes to hold, so there is some variation.
I wish there can be more focus on the voting rights for passive funds. Investors are concentrating voting power with these fund managers, just giving away their voting rights for free. I'd like to see better investor voting management systems become more available for "pass through" voting for passive fund investors.
[1] https://vanderwalt.de/blog/etf-vs-direct-indexing-investing-...
It isn't possible to have an informed vote for the 500 companies in a S&P index fund and still have a life.
I probably have an informed opinion on the company I work for - but I don't have enough shares to matter. The other 499 I know nothing about.
Individually we don't have significant shares, but aggregate it up to BlackRock / Vanguard level, then there is real influence. What is that influence worth? that influence given to the fund manager should be priced correctly. I agree, you probably dont want to have to vote on 500 companies, but to start with it should be an "opt out" decision if you don't care. Alternatively you could allocate your votes to a proxy entity that aggregates like minded investors votes.
Having voting rights kind of goes against the point of tracking an index though. Better invest in ESG funds or something like that. And for funds that use synthetic replication there is nothing to vote on in the first place.
> Having voting rights kind of goes against the point of tracking an index though.
Not sure I follow how voting rights goes against the point of tracking an index? I'd say the value of the index implicitly prices in the value of the voting rights in the constituents. So if your index does not contain the voting rights, should the index price not be different?
> And for funds that use synthetic replication there is nothing to vote on in the first place.
There are all kinds of funds, of course when it's 100% synthetic then so be it. But if it holds a representitive sample of Russell 3000, then those votes count.
The provider of the index is usually not the same entity as the fund manager. Although the fund is actually quite free in the choice of securities that it can use to track the index. It depends on the fine print of the prospectus. It could conceivably offer its shareholders voting rights regarding the presence of controversial items in its portfolio, at the risk of underperformance compared to the reference index.
Didn't they recently increase uk fees a tonne?
That was the platform fees.
I switched from VTI to ITOT, because Vanguard's actions recently have been drifting away from it's founders. This inspires confidence, but I'm still wary. VTI is too expensive compared to ITOT. Fidelity doesn't have any ETFs listed on the Bogleheads website either [0].
> VTI is too expensive compared to ITOT.
What? Both are 0.03% ER funds.
I meant price wise. VTI is almost $300 per share.
Shouldn't matter if you invest larger sums or with a savings plan.
Feels so strange that the average investor can't outperform an index fund with low management fees.
A small investor is so agile - they can move in and out of positions. Why that agility can't be utilized to outperform a slow moving index fund, long-term?
Agile is not something a small investor can win at. You can win by reading the 10k and such and then following what is happening in the real world and thus predict what will happen. You should be able to make a nice income doing this full time, but it won't be get rich, and probably won't be even tech levels. Note that I said full time. You will follow many companies and conclude the market is right and thus not do better, while what you need is the one where you can figure out in advance the company will do good/bad before the market does and thus buy/sell in advance.
Peter Lynch famously (he was then manager of the world's largest fund) got out of Gap when he noticed his daughters didn't buy anything there for school and that was his clue that they wouldn't do well next quarter. Gap as had ups and downs since. This is the type of research you will be doing all the time, trying to find a evidence of a company that will disappoint before anyone else knows. This is hard hard hard, and is always a matter of luck. Remember by the time it is public the large players already know and have acted (that is they get alerts the instant it becomes public and are first in line to act on it, technically you get the information at the same time and can act as fast but in practice you will not)
All the easy alpha has already been taken by high-frequency traders and big trading firms, and once all the easy alpha is gone, you're left more-or-less just tracking general market behavior... just like index funds.
Except being more agile also means eating more fees.
It should not come as a surprise. While it's a bit of a simplification, index funds are effectively a representation of the average surviving investor...that is among all investors, index funds are the average of those who have not yet gone broke. The investors who have gone broke get culled out.
So it should not at all be surprising that index funds perform better than the average investor.
Furthermore, as far as agility is concerned, it doesn't play much of a role in the market. Almost all gains in the stock market over the course of a year come from a handful of days. For example in 2024, just 9 days account for the entire yearly gains.
Does average investor here imply someone who's educated on the topic and knows what he's doing?
And you're also saying investor, not trader. So moving in and out quickly doesn't matter as much if we're talking about mid to long term holds.
It also makes sense that those with the largest edge in decision making for trades would collect most of the money.
Probably because no matter how agile you are, you'll never be more agile than the market. And being much slower isn't worse than being a little slower.
Thinking out loud here..
If the basic hypothesis is that “don’t bet against the U.S.” and that the U.S. long term, always go up, and I’m assuming most of us buy in to this hypothesis because most of us are probably holding an index fund for the S&P or QQQQ long term..
Looking at my portfolio, I just weathered the 2022-2023 storm without even looking. It could have been down 50%, it could have been 90%, I wasn’t selling. I’m all in for another 20 years.
Given that stance, why wouldn’t I just buy and hold a leveraged asset like TQQQ?
For plausible definitions of "average investor" in this context, it's arithmetically impossible: https://web.stanford.edu/~wfsharpe/art/active/active.htm
Some can. I have done well with leveraged tech funds.
Is TQQQ a long-term holding?
You could stomach the 80% draw down?
I've been holding it for close to 10 years, it's my best performing holding by a long shot. I like to hold leveraged ETFs in my tax-free investment account and TQQQ along with UPRO are the ETFs of choice for me.
No, the reason I hold them in my tax-free investment account is because you can't trade on margin in those accounts. So the closest thing to margin you can get is a leveraged ETF. I never have to worry about getting margin called, or going into debt with a leveraged ETF, those things are not possible. I like to think of 3x leveraged ETFs as letting me take my tax free investment account and tripling it.
I can certainly lose a lot of money, the fees are substantially higher than a regular ETF (about 4x higher), and the volatility and constant rebalancing on a daily basis results in a phenomenon known as volatility drag... and yet TQQQ and UPRO have been an absolute killer over the past 10 years.
In my non-tax free accounts I hold unleveraged ETFs: SPY and QQQ.
What does this mean for folks like me who buy Vanguard ETFs through Robinhood.
The Vanguard UI / UX is absolutely terrible. Opening the website instantly transports me to 2002.
I see several people complaining about this in this thread. Are you talking about their old interface or the new one they released a couple years ago? I find their new one to be decent. It's a little complicated sometimes, but I think it's hard to build a site that allows you to do so many things without being a little complicated.
The fees will be the same regardless of where you buy Vanguard funds.
The only concern now is whether the indexes keep growing.
Not for UK investors apparently.
I always upvote the archive link unless it is already the top comment, ha ha.
I've detached this comment from https://news.ycombinator.com/item?id=42933291 so I could move the latter to the top :)
Let's not forget that Vanguard has taken a strong stance against crypto [0]. Claiming to significantly invest in technology while deliberately ignoring the latest advancements in financial technology, seems contradictory. If their business was doing so well, they wouldn't have to lower fees.
Vanguard funds are owned by the investors in those funds. The fees that they charge are to cover the expenses, not make profit for a private company. If they're doing so well that the fees are brining in more money than they need, they lower the fees so that their owners (the investors in the funds) don't have to pay as much in fees.
Their business is doing so well that they can lower fees.
> Their business is doing so well that they can lower fees.
The counter to that is that they are not doing so well, that they need to attract more investors.
Your counter assumes that it's one or the other, but there could be more reasons, such as doing well but looking to steal even more market share.
At over $10 trillion AUM, it's hard to think that they're "not doing so well".
Vanguard has been reducing fees on a pretty regular basis.
My assumption is that the corporate leaders go for a dip in the McDuck money pond every year, and when the level is too high that it risks overflowing, they adjust the fees down.
I doubt at that size you could attract enough new money to offset the reduced revenue from reducing fees on the existing $10T.
cynically, crypto’s greatest achievement thus far has been speed running 200 years of financial mistakes and explaining why we need financial regulation.
It is so predictable to get a straw man argument like this.
It's not a straw man argument when the counterargument you propose is "actually, evading regulation is the point".
Forget evading regulation that has been possible with cash or gold since millennia.
Its just sad that time and time again HN of all placed refuses to even consider that, yes magical p2p internet money does indeed have its uses outside of illegal activities.
There is a difference between investment and speculation and lots of people learn it the hard way, eventually.
Typically: Investment is long term. Speculation is short. Investment is looking for a gradual return over time. Speculation is betting on price.
I've been long on crypto since 2013, I'm not a crypto day trader, and I'm well aware of DeFi. I consider that an investment, not speculation.
Let people treat things the way they want to. All of the people who want to stick with Vanguard and their position are free to do so.
They believe that cryptocurrency is not an investment vehicle, which I also believe (and I own a little). They have clearly stated that they invest in things with real-world value.
This is for the same reason they don't mix gold ETFs into their indexes. The point of their funds is to track companies that produce goods and services, not asserts and commodities.
Twist things around however you want, but VGPMX [0] invests in the companies producing precious metals. 1/4 of the portfolio is that.
[0] https://investor.vanguard.com/investment-products/mutual-fun...
Vanguard invests in bitcoin companies. They just don't have a dedicated ETF or mutual fund.
For instance, Vanguard is one of the largest institutional investors in MSTR and MARA.
MSTR is now a direct proxy for btc, and MARA definitely is. Having massive investments in those stocks while claiming "we only invest in companies, not crypto", feels super wonky to me.
And now I trust Vanguard just a little more.
I'd rather not have to "trust" any financial institution.
https://www.cnbc.com/2025/01/17/vanguard-fined-more-than-100...
https://asic.gov.au/about-asic/news-centre/find-a-media-rele...
https://www.reuters.com/business/finance/vanguard-fined-prov...
You are likely to have to trust them eventually. SPIC insurance is $500,000. If you have more than that and it turns out instead of buying the investments you think they were a ponzi scheme that sent the money to the owners when it is discovered you get up to $500,000 of your money back, while the rest is your loss. You really should have more than that by age 40 if you want a comfortable retirement (that is todays dollars, if you are 18 now when you hit 40 inflation will have made the number bigger, while if you are 80 the number when you were 40 would have been lower)
If you use a separate broker for each $500k then you only have to worry about multiple brokers catastrophically failing at the same time. And there are multiple types of account with each type having a separate $500k limit.
I'd rather not have to trust a non-profit insurance company to keep a very small portion of my funds safe. This stuff should be in-code and immutable by any one individual or corporation.
I'd rather not have to either. I'm going to be honest. I'm not a smart man. I don't understand the first link at all. The other two I don't care about.
However, to the extent that those things are bad, they are much less bad than my trust in myself to securely manage a crypto wallet key.
If there was some magic thing that just automatically worked and I could somehow trust it, I would be all in. That's not the case for any cryptocurrency I know of because you need to A) maintain access to your wallet key and B) prevent other people from getting it and C) don't inadvertantly click any of those links that drain your account that I've heard of (I don't understand the details)
If you can put in the research and discipline to satisfy those requirements, I'm certainly not going to try to talk you out of it, but they're way to steep for us normies.
> By the way, if you think crypto UX is hard, try trading options with thinkorswim.
You've misunderstood me. I have no interest in shitty UX. A competition for the shittiest UX is like the lowest high jump. You want a shitty UX? I can get you one by 4:30, with nail polish. The fact that extremely confusing UX is easy to find in no way mitigates a merely very confusing UX.
I kind of agree with you though. Cryptocurrency is kind of a neat idea. Shame about the actual manifestation though. I'm not opposed on principle. If anyone ever figures out how to make it good, I'll check it out. But in the first 15 years, nothing reasonable has emerged. I don't have much hope for the next 15 years either.
Maybe someone will figure it out, but I don't think that's actually going to happen. So I don't think investments in cryptocurrency research or whatever is a good idea.
Agreed—this strengthens my feelings about the brand. And I write this as someone who also holds (a tiny amount of) crypto
Vanguard won't let you trade anything even tangentially related to crypto FYI
MSTR was not a crypto company when it was listed so this crypto backdoor trojan horse is an exception
Good choice, one of my best investments ever. Get to 100 shares and sell some covered calls.