5 ms·

Jack Bogle would hate what Vanguard has become

25 points by benjaminklick 7mo ago

deleted 7mo ago
[deleted]
ta9000 7mo ago
Fees on my passive investments there (mostly target date funds) seem to be as low as ever? I don’t care if they offer _more_ options as long as it doesn’t negatively impact their passive business.
- benjaminklick 7mo ago
  Fair point. My thought is they are clearly spending money on tons of people they wouldn't have to if they were strictly passive. Presumably, if they didn't, the fees would be lower than they are now.
  - ta9000 7mo ago
    3 bps instead of 4? That’s a savings of… $100 on a million annually.
    - benjaminklick 7mo ago
      I mean even $100 annually compounds to be tens of thousands over a lifetime. Furthermore, Vanguard manages like almost 10 trillion so that ends up being nearly a billion extra extracted per year. My main issue though is that Vanguard's brand is low-risk passive, but they are now selling high-risk active funds under that brand.
      - UncleMeat 7mo ago
        Vanguard's brand is "retirement management company." If you were to ask the vast majority of people with their retirement accounts managed by Vanguard who Jack Bogle was very few would be able to answer. Quibbling over one basis point in fees just doesn't feel valuable. Tracking error will be larger than this.
      - gregw2 7mo ago
        You aren't wrong that Vanguard seems more active friendly these days. But Vanguard under Bogle always played both sides of the fence at least to some extent. They have always had that actively managed Windsor fund, right? And Wellington? I think your article headline shows you have a fair bit more to learn about Bogle. Or at least you haven't made your case on that front. Bogle was at least as much about low cost and aligning interests of the investment client as he was about passive indexing, though he is known more for the latter. Here's a writeup with a couple pointers to more on the topic from Bogle: https://www.bogleheads.org/forum/viewtopic.php?t=388377 https://www.bogleheads.org/forum/viewtopic.php?t=388377
  - SpicyLemonZest 7mo ago
    Why should we presume that? It seems equally likely that the fees would have to be higher if not supported by profitable cross-sales.
    - benjaminklick 7mo ago
      It's high risk. Sure, if active funds succeed. But active funds fail more often than they succeed.
      - ta9000 7mo ago
        That’s a risk that Vanguard investors in active funds are willing to take. They’re not stupid, investors at Vanguard know that passive is their primary focus. Also the fees for their active funds are lower than average so they have a higher likelihood of success since a lot of the drag on active performance is… high fees.
  - no-name-here 7mo ago
    Isn't it equally likely the opposite - your comment presumes that Vanguard is using money from passive to prop up active, whereas it could also be that money from active is already being used to lower fees on passive?
    - benjaminklick 7mo ago
      And what happens if active fails? Then passive would take the hit even though people go with Vanguard specifically for the low-risk passive.
      - david-gpu 7mo ago
        > And what happens if active fails? Then passive would take the hit What specific concern do you have in mind? Are you aware that the corporate structure of Vanguard is that it is the funds who own the company, not the other way around? https://corporate.vanguard.com/content/corporatesite/us/en/corp/why-vanguard/sets-us-apart/ownership.html https://corporate.vanguard.com/content/corporatesite/us/en/c...
      - red-iron-pine 7mo ago
        why would the passive funds collapse? or the business? why would the active funds fail? if you have 1.1 million in the bank you can afford to take $500 to poker tables
jglamine 7mo ago
Fidelity has been killing it with their passive investing options. Zero expense ratio funds, cash management account. I am going to switch, will save perhaps 30k in fees over next few decades
- benjaminklick 7mo ago
  Absolutely. Fidelity has been closer to Vanguard's historical reputation than Vanguard itself in recent years.
- no-name-here 7mo ago
  I like Fidelity (and Vanguard), but at the metric the OP post uses (% employees handling passive products), Fidelity is likely far, far worse than Vanguard - Fidelity has 4 employees for every 1 Vanguard employee. And the whole point of passive products is that you don't have an employee managing a fund whose expenses eat into returns. Vanguard and Fidelity both continue to offer excellent passive products, and Vanguard also continues to cut fee ratios on its passive products, while some of their competitors have been incredibly anti-consumer by launching new lower-fee versions of a fund instead of lowering the fees on their existing fund. It's also great that Fidelity has their “zero” offerings, but 1) they are mutual funds so considered less tax efficient in the long term if in a taxable account, and 2) can't be transferred to a Fidelity competitor brokerage, which can also be an issue if in a taxable account.
- zeroonetwothree 7mo ago
  The zero index funds have slightly more tracking error than the vanguard funds. Also if you are in taxable I would be worried about being locked in if fidelity start charging fees on them. I think vanguard is a safer bet to keep fees low long term. And ultimately 4bps is irrelevant.
- gregw2 7mo ago
  Rather than switch completely, consider putting your eggs in two baskets?
benjaminklick 7mo ago
Permanent summary of my thoughts here: https://ristforever.com/rist/ea70058d-ab78-45e7-81f9-b3a5dceab57b https://ristforever.com/rist/ea70058d-ab78-45e7-81f9-b3a5dce... You can be held to your words too!
nly 7mo ago
I hate the way Vanguard UK customers subsidize the US business (Fees are lower for US customers than UK ones on comparable funds) They aren't the cheapest anymore in almost every category, but their brand recognition has exploded here in recent years.
- benjaminklick 7mo ago
  Damn, what?! I didn't know the UK rates were higher. But yeah the old Vanguard brand that Bogle built is strong.
- ta9000 7mo ago
  Do you have any evidence that they’re subsidizing US customers? It’s possible the fees are higher in the UK due to it being more expensive to operate the funds.
  - nly 7mo ago
    Most of their funds are incorporated in Ireland (the UK doesn't have native ETFs, they're all European but can be listed on the LSE) Investors in the UK are not partners in Vanguards mutual structure, and Vanguards UK platform ("Vanguard Investor") is not run by Vanguard but by a third party (FNZ, a New Zealand fintech). OCF for VT, a global equity index ETF in the US, is 0.06% UK equivalent (the Global All Cap Index Fund, or perhaps the VWRP All World ETF) is 0.23% and 0.19% respectively, and the latter excludes small caps and both have fewer holdings than VT Invesco's All World ETF in the UK, tracking the same index is 0.15% and HSBC have an index fund tracking the same index also at 0.13% Vanguard UK have a 0.15% platform fee whereas the best UK alternatives are completely free. Vanguard UK recently introduced a minimum nominal platform fee on top which screwed over small investors. Vanguard are no longer cheap and not on our side.
    - ta9000 7mo ago
      Thanks. Are you sure the cost of the fund is higher because it’s a fund and not an ETF like VT? The platform fee seems strange, but I wonder if other companies collect that fee somewhere else?
keernan 7mo ago
Bogle believed the best investment for any individual is VOO held forever. I think he'd prefer that be the only product Vanguard offered to individuals.

25 points by benjaminklick 7mo ago

deleted 7mo ago

[deleted]

Fees on my passive investments there (mostly target date funds) seem to be as low as ever? I don’t care if they offer _more_ options as long as it doesn’t negatively impact their passive business.

benjaminklick 7mo ago
Fair point. My thought is they are clearly spending money on tons of people they wouldn't have to if they were strictly passive. Presumably, if they didn't, the fees would be lower than they are now.
- ta9000 7mo ago
  3 bps instead of 4? That’s a savings of… $100 on a million annually.
  - benjaminklick 7mo ago
    I mean even $100 annually compounds to be tens of thousands over a lifetime. Furthermore, Vanguard manages like almost 10 trillion so that ends up being nearly a billion extra extracted per year. My main issue though is that Vanguard's brand is low-risk passive, but they are now selling high-risk active funds under that brand.
    - UncleMeat 7mo ago
      Vanguard's brand is "retirement management company." If you were to ask the vast majority of people with their retirement accounts managed by Vanguard who Jack Bogle was very few would be able to answer. Quibbling over one basis point in fees just doesn't feel valuable. Tracking error will be larger than this.
    - gregw2 7mo ago
      You aren't wrong that Vanguard seems more active friendly these days. But Vanguard under Bogle always played both sides of the fence at least to some extent. They have always had that actively managed Windsor fund, right? And Wellington? I think your article headline shows you have a fair bit more to learn about Bogle. Or at least you haven't made your case on that front. Bogle was at least as much about low cost and aligning interests of the investment client as he was about passive indexing, though he is known more for the latter. Here's a writeup with a couple pointers to more on the topic from Bogle: https://www.bogleheads.org/forum/viewtopic.php?t=388377 https://www.bogleheads.org/forum/viewtopic.php?t=388377
- SpicyLemonZest 7mo ago
  Why should we presume that? It seems equally likely that the fees would have to be higher if not supported by profitable cross-sales.
  - benjaminklick 7mo ago
    It's high risk. Sure, if active funds succeed. But active funds fail more often than they succeed.
    - ta9000 7mo ago
      That’s a risk that Vanguard investors in active funds are willing to take. They’re not stupid, investors at Vanguard know that passive is their primary focus. Also the fees for their active funds are lower than average so they have a higher likelihood of success since a lot of the drag on active performance is… high fees.
- no-name-here 7mo ago
  Isn't it equally likely the opposite - your comment presumes that Vanguard is using money from passive to prop up active, whereas it could also be that money from active is already being used to lower fees on passive?
  - benjaminklick 7mo ago
    And what happens if active fails? Then passive would take the hit even though people go with Vanguard specifically for the low-risk passive.
    - david-gpu 7mo ago
      > And what happens if active fails? Then passive would take the hit What specific concern do you have in mind? Are you aware that the corporate structure of Vanguard is that it is the funds who own the company, not the other way around? https://corporate.vanguard.com/content/corporatesite/us/en/corp/why-vanguard/sets-us-apart/ownership.html https://corporate.vanguard.com/content/corporatesite/us/en/c...
    - red-iron-pine 7mo ago
      why would the passive funds collapse? or the business? why would the active funds fail? if you have 1.1 million in the bank you can afford to take $500 to poker tables

jglamine 7mo ago

Fidelity has been killing it with their passive investing options. Zero expense ratio funds, cash management account. I am going to switch, will save perhaps 30k in fees over next few decades

benjaminklick 7mo ago
Absolutely. Fidelity has been closer to Vanguard's historical reputation than Vanguard itself in recent years.
no-name-here 7mo ago
I like Fidelity (and Vanguard), but at the metric the OP post uses (% employees handling passive products), Fidelity is likely far, far worse than Vanguard - Fidelity has 4 employees for every 1 Vanguard employee. And the whole point of passive products is that you don't have an employee managing a fund whose expenses eat into returns. Vanguard and Fidelity both continue to offer excellent passive products, and Vanguard also continues to cut fee ratios on its passive products, while some of their competitors have been incredibly anti-consumer by launching new lower-fee versions of a fund instead of lowering the fees on their existing fund. It's also great that Fidelity has their “zero” offerings, but 1) they are mutual funds so considered less tax efficient in the long term if in a taxable account, and 2) can't be transferred to a Fidelity competitor brokerage, which can also be an issue if in a taxable account.
zeroonetwothree 7mo ago
The zero index funds have slightly more tracking error than the vanguard funds. Also if you are in taxable I would be worried about being locked in if fidelity start charging fees on them. I think vanguard is a safer bet to keep fees low long term. And ultimately 4bps is irrelevant.
gregw2 7mo ago
Rather than switch completely, consider putting your eggs in two baskets?

benjaminklick 7mo ago

Permanent summary of my thoughts here: https://ristforever.com/rist/ea70058d-ab78-45e7-81f9-b3a5dceab57b https://ristforever.com/rist/ea70058d-ab78-45e7-81f9-b3a5dce... You can be held to your words too!

nly 7mo ago

I hate the way Vanguard UK customers subsidize the US business (Fees are lower for US customers than UK ones on comparable funds) They aren't the cheapest anymore in almost every category, but their brand recognition has exploded here in recent years.

benjaminklick 7mo ago
Damn, what?! I didn't know the UK rates were higher. But yeah the old Vanguard brand that Bogle built is strong.
ta9000 7mo ago
Do you have any evidence that they’re subsidizing US customers? It’s possible the fees are higher in the UK due to it being more expensive to operate the funds.
- nly 7mo ago
  Most of their funds are incorporated in Ireland (the UK doesn't have native ETFs, they're all European but can be listed on the LSE) Investors in the UK are not partners in Vanguards mutual structure, and Vanguards UK platform ("Vanguard Investor") is not run by Vanguard but by a third party (FNZ, a New Zealand fintech). OCF for VT, a global equity index ETF in the US, is 0.06% UK equivalent (the Global All Cap Index Fund, or perhaps the VWRP All World ETF) is 0.23% and 0.19% respectively, and the latter excludes small caps and both have fewer holdings than VT Invesco's All World ETF in the UK, tracking the same index is 0.15% and HSBC have an index fund tracking the same index also at 0.13% Vanguard UK have a 0.15% platform fee whereas the best UK alternatives are completely free. Vanguard UK recently introduced a minimum nominal platform fee on top which screwed over small investors. Vanguard are no longer cheap and not on our side.
  - ta9000 7mo ago
    Thanks. Are you sure the cost of the fund is higher because it’s a fund and not an ETF like VT? The platform fee seems strange, but I wonder if other companies collect that fee somewhere else?

keernan 7mo ago

Bogle believed the best investment for any individual is VOO held forever. I think he'd prefer that be the only product Vanguard offered to individuals.