5 ms·

I still trust Vanguard now because they're not-for-profit. I own a certain percentage of it by buying their index funds and I know their interests are beholden

I still trust Vanguard now because they're not-for-profit. I own a certain percentage of it by buying their index funds and I know their interests are beholden to mine. The ER for Vanguard still only 0.15%, which is about $12/mo per $100k invested.

mkozlows 8y ago
0.04% for Admiral shares, aka the ones for people who have $100k.
- froindt 8y ago
  Admiral shares come in at 10k for most of their funds. E.g. VTSAX has the 0.04% ER and a 10k minimum, while the Investor class is at 0.14% (VTSMX). https://investor.vanguard.com/mutual-funds/fees https://investor.vanguard.com/mutual-funds/fees > Admiral Shares > * $10,000 for most index funds and tax-managed funds. > * $50,000 for most actively managed funds. > * $100,000 for certain sector-specific index funds.
  - TheCoelacanth 8y ago
    Does that include target retirement funds and the like that include a mix of different asset classes? Last time I looked I didn't think it did, so you would need more than $10k if you want to do the sensible thing and not have 100% of your assets in stocks.
    - froindt 8y ago
      The target date funds seem to have a 1k minimum with an ER of 0.13-0.15%. [1] There are no admiral shares for target date funds. Across their other mutual fund offerings, investor shares generally have a similar expense ratio to the target date funds with a 3k minimum. When I was getting started, it took awhile before I was diversified beyond a single fund (currently not using the target date funds), then eventually getting up to admiral shares. > Last time I looked I didn't think it did, so you would need more than $10k if you want to do the sensible thing and not have 100% of your assets in stocks. Looking through all their target date funds, none have more than 90% stocks. The 2015-2040 funds have 60% to 15% bonds, with all later dates at 10%. [1] https://investor.vanguard.com/mutual-funds/list#/mutual-funds/asset-class/month-end-returns https://investor.vanguard.com/mutual-funds/list#/mutual-fund...
      - TheCoelacanth 8y ago
        Right, target date retirement funds are never 100% stocks because only a crazy person would have a portfolio of 100% stocks. You can't have a sane portfolio of admiral shares with only $10k because you would have to be invested 100% in a single asset class which is never a good idea.
- sigstoat 8y ago
  admiral shares of the total stock market fund (VTSAX) have a minimum investment of $10k. that's also the case for the S&P 500 fund (VFIAX) and the total bond market fund (VBTLX, 0.05% ER).
- waterphone 8y ago
  $10,000
- deleted 8y ago
  [deleted]
- bluGill 8y ago
  which sounds like a lot, but if you are actually investing long term ins't much. Remember these are stock funds, you should never invest in stocks if you need the money within 5 years - the historical odds are often against you breaking even if you need the money in 5 years. You cannot retire on $100k, which is one of the most common investments people make.
  - namibj 8y ago
    Actually, no. If you have decent low fee trading, your expected gain is just scaled according to compound interest rules compared to holding for 10x the time. The volatility is much larger relative to the lower gain you got, so the simple classification, of keeping it in cash would have had more yield than the fund. So, the rule is not investing for 5+ years, but only investing as much as you can loose without feeling like a soon-dead human....
9873198623 8y ago
This is key. Finance companies love playing bait-and-switch games once they have your assets and build up sufficient friction to keep you from moving to greener pastures when they decide to reign in profitability again. ERs are a pure marketing gimmick once you get down to early 2000s-era Vanguard fees. Beyond that the devil is in the details with how incentives are aligned for those managing, including security lending practices which can either juice returns to completely offset those minimal fees or buy those yachts that the clients never seem to have, and especially for index funds you have tracking error which adds several basis points for/against you depending on manager competence in accurately sampling the index while minimizing several forms of risk, latency/frequency in updating positions that are a discrete approximation of continuous compounding, and the hugely overlooked problem that large institutional investors have to use complicated derivative orders, exchange dark pool agreements, swaps, and other methods of obscuring huge pool transactions where HFT will gnaw away at basis points here and there knowing that those large blocks of shares must be rebalanced at specific times to meet predetermined liquidity demands. Don't misunderestimate the activeness of passive index funds. :)
stevehawk 8y ago
But not for profit doesn't mean what most people think. They're welcome to make all of the profit they want. And they are welcome to pay their executives as grossly as they want. They just don't have shareholders to answer to.
- ThirdFoundation 8y ago
  And they don't ever report it. I used to work there. They are pretty transparent in most of their ranks about the salary ranges. However, people at the top are paid an unknown amount of money. Probably an obscene amount, disguised through alternative compensation methods.
opmac 8y ago
The term "not-for-profit" is almost meaningless here. They are not a charitable organization or advocating the social cause of "helping people invest". Vanguard makes profit. They probably make a crap-ton of profit. In fact, that's their main goal - to make as much money as possible. The caveat here is they don't have shareholders to report to, nor are they obligated to publicly report their financial statements. The top dogs at Vanguard probably make insane amounts of money all the while being "not-for-profit"... and nobody really knows because this stuff is private. And I say this as a Vanguard customer for over a decade now, and I will probably continue to purchase funds from them for many reasons. But don't be fooled by thinking that they are doing some sort of public service by being "not-for-profit".
- TheHegemon 8y ago
  All things considered Jack Bogle did not become rich from Vanguard. For the size of their fund they have almost no employees and are not exactly flush with cash. Vanguard is doing a sort of public service: http://freakonomics.com/podcast/stupidest-thing-can-money-rebroadcast/ http://freakonomics.com/podcast/stupidest-thing-can-money-re...
  - opmac 8y ago
    Didn't become rich? He said he's worth about $100 million. Maybe less than expected for the founder of $5 trillion investment firm, but he's most certainly "rich". Also, almost no employees? According to Wikipedia they have over 16k employees. And I don't know how you know their cash flow, considering they're privately held and that information is not out there, but their AUM is over $5 trillion so it's hard to believe they'd have any sort of cash flow issues.
- ASinclair 8y ago
  > The caveat here is they don't have shareholders to report to Sort of. The funds own Vanguard. So shareholders of those funds own Vanguard.
- mywittyname 8y ago
  Being an executive at a not-for-profit organization is amazingly lucrative. Hell, being a mid-level personnel at one is pretty nice too. What you lose in salary you gain back in the form of massive bonuses.
prostoalex 8y ago
Semantics. When a for-profit company has money in the bank after paying all the expenses, they get to call it "profit". When a non-profit company has money in the bank after paying all the expenses, they get to call it "reserves". Executives in both sectors are tasked with bulking those up to ensure the long-term survival of the org.

mkozlows 8y ago

0.04% for Admiral shares, aka the ones for people who have $100k.

froindt 8y ago
Admiral shares come in at 10k for most of their funds. E.g. VTSAX has the 0.04% ER and a 10k minimum, while the Investor class is at 0.14% (VTSMX). https://investor.vanguard.com/mutual-funds/fees https://investor.vanguard.com/mutual-funds/fees > Admiral Shares > * $10,000 for most index funds and tax-managed funds. > * $50,000 for most actively managed funds. > * $100,000 for certain sector-specific index funds.
- TheCoelacanth 8y ago
  Does that include target retirement funds and the like that include a mix of different asset classes? Last time I looked I didn't think it did, so you would need more than $10k if you want to do the sensible thing and not have 100% of your assets in stocks.
  - froindt 8y ago
    The target date funds seem to have a 1k minimum with an ER of 0.13-0.15%. [1] There are no admiral shares for target date funds. Across their other mutual fund offerings, investor shares generally have a similar expense ratio to the target date funds with a 3k minimum. When I was getting started, it took awhile before I was diversified beyond a single fund (currently not using the target date funds), then eventually getting up to admiral shares. > Last time I looked I didn't think it did, so you would need more than $10k if you want to do the sensible thing and not have 100% of your assets in stocks. Looking through all their target date funds, none have more than 90% stocks. The 2015-2040 funds have 60% to 15% bonds, with all later dates at 10%. [1] https://investor.vanguard.com/mutual-funds/list#/mutual-funds/asset-class/month-end-returns https://investor.vanguard.com/mutual-funds/list#/mutual-fund...
    - TheCoelacanth 8y ago
      Right, target date retirement funds are never 100% stocks because only a crazy person would have a portfolio of 100% stocks. You can't have a sane portfolio of admiral shares with only $10k because you would have to be invested 100% in a single asset class which is never a good idea.
sigstoat 8y ago
admiral shares of the total stock market fund (VTSAX) have a minimum investment of $10k. that's also the case for the S&P 500 fund (VFIAX) and the total bond market fund (VBTLX, 0.05% ER).
waterphone 8y ago
$10,000
deleted 8y ago
[deleted]
bluGill 8y ago
which sounds like a lot, but if you are actually investing long term ins't much. Remember these are stock funds, you should never invest in stocks if you need the money within 5 years - the historical odds are often against you breaking even if you need the money in 5 years. You cannot retire on $100k, which is one of the most common investments people make.
- namibj 8y ago
  Actually, no. If you have decent low fee trading, your expected gain is just scaled according to compound interest rules compared to holding for 10x the time. The volatility is much larger relative to the lower gain you got, so the simple classification, of keeping it in cash would have had more yield than the fund. So, the rule is not investing for 5+ years, but only investing as much as you can loose without feeling like a soon-dead human....

9873198623 8y ago

This is key. Finance companies love playing bait-and-switch games once they have your assets and build up sufficient friction to keep you from moving to greener pastures when they decide to reign in profitability again. ERs are a pure marketing gimmick once you get down to early 2000s-era Vanguard fees. Beyond that the devil is in the details with how incentives are aligned for those managing, including security lending practices which can either juice returns to completely offset those minimal fees or buy those yachts that the clients never seem to have, and especially for index funds you have tracking error which adds several basis points for/against you depending on manager competence in accurately sampling the index while minimizing several forms of risk, latency/frequency in updating positions that are a discrete approximation of continuous compounding, and the hugely overlooked problem that large institutional investors have to use complicated derivative orders, exchange dark pool agreements, swaps, and other methods of obscuring huge pool transactions where HFT will gnaw away at basis points here and there knowing that those large blocks of shares must be rebalanced at specific times to meet predetermined liquidity demands. Don't misunderestimate the activeness of passive index funds. :)

stevehawk 8y ago

But not for profit doesn't mean what most people think. They're welcome to make all of the profit they want. And they are welcome to pay their executives as grossly as they want. They just don't have shareholders to answer to.

ThirdFoundation 8y ago
And they don't ever report it. I used to work there. They are pretty transparent in most of their ranks about the salary ranges. However, people at the top are paid an unknown amount of money. Probably an obscene amount, disguised through alternative compensation methods.

opmac 8y ago

The term "not-for-profit" is almost meaningless here. They are not a charitable organization or advocating the social cause of "helping people invest". Vanguard makes profit. They probably make a crap-ton of profit. In fact, that's their main goal - to make as much money as possible. The caveat here is they don't have shareholders to report to, nor are they obligated to publicly report their financial statements. The top dogs at Vanguard probably make insane amounts of money all the while being "not-for-profit"... and nobody really knows because this stuff is private. And I say this as a Vanguard customer for over a decade now, and I will probably continue to purchase funds from them for many reasons. But don't be fooled by thinking that they are doing some sort of public service by being "not-for-profit".

TheHegemon 8y ago
All things considered Jack Bogle did not become rich from Vanguard. For the size of their fund they have almost no employees and are not exactly flush with cash. Vanguard is doing a sort of public service: http://freakonomics.com/podcast/stupidest-thing-can-money-rebroadcast/ http://freakonomics.com/podcast/stupidest-thing-can-money-re...
- opmac 8y ago
  Didn't become rich? He said he's worth about $100 million. Maybe less than expected for the founder of $5 trillion investment firm, but he's most certainly "rich". Also, almost no employees? According to Wikipedia they have over 16k employees. And I don't know how you know their cash flow, considering they're privately held and that information is not out there, but their AUM is over $5 trillion so it's hard to believe they'd have any sort of cash flow issues.
ASinclair 8y ago
> The caveat here is they don't have shareholders to report to Sort of. The funds own Vanguard. So shareholders of those funds own Vanguard.
mywittyname 8y ago
Being an executive at a not-for-profit organization is amazingly lucrative. Hell, being a mid-level personnel at one is pretty nice too. What you lose in salary you gain back in the form of massive bonuses.

prostoalex 8y ago

Semantics. When a for-profit company has money in the bank after paying all the expenses, they get to call it "profit". When a non-profit company has money in the bank after paying all the expenses, they get to call it "reserves". Executives in both sectors are tasked with bulking those up to ensure the long-term survival of the org.