What makes VG so successful

[mickeyd]

Nothing new for VG investors here, but a pretty good summary of why Vanguard is considered tops by many, many investors.

There's never been a money-management business like Vanguard. Any time it enters a new market, competitors see their margins demolished via the so-called Vanguard effect. No other firm controls costs the way it does.
And since the financial crisis, no other firm has attracted more assets more quickly. Since 2009, Vanguard has expanded from about $1 trillion in assets under management to almost $5 trillion.

https://www.financial-planning.com/opinion/understanding-what-makes-vanguard-so-successful

 

[gauss]

Really hoping that the culture that drives this remains in spite of leadership changes past and going forward.

 

[sengsational]

Personally, I think the world would be a better place if there were more entities that did not have stock holders. Vanguard is unique in that regard within the financial services industry. Other bright spots for non-shareholder entities: credit unions and REI.

 

[Rianne]

"For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value.

"In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me."

Warren Buffet

 

[Sunset]

I am a shareholder of Vanguard, a bit indirectly.

I just voted on a bunch of things for them.

https://about.vanguard.com/what-sets-vanguard-apart/why-ownership-matters/

This type of ownership works really well for the members in certain circumstances and I'm glad Jack Bogle set it up this way.

 

[MRG]

"For decades, Jack has urged investors to invest in ultra-low-cost index funds. In his crusade, he amassed only a tiny percentage of the wealth that has typically flowed to managers who have promised their investors large rewards while delivering them nothing – or, as in our bet, less than nothing – of added value.

"In his early years, Jack was frequently mocked by the investment-management industry. Today, however, he has the satisfaction of knowing that he helped millions of investors realize far better returns on their savings than they otherwise would have earned. He is a hero to them and to me."

Warren Buffet

That's very true. It's a very inbreed industry and Bogle ticked off many of his peers at other firms.

In a way the entire industry benefited from his wisdom.

 

[markelp]

I'v seen a lot of these articles lately and they seem to focus on Vanguard bringing in new money at the expense of other firms:

And since the financial crisis, no other firm has attracted more assets more quickly. Since 2009, Vanguard has expanded from about $1 trillion in assets under management to almost $5 trillion.

Not all of the increase can be attributed to new money. One factor is simply the appreciation of the market since the trough of the recession. Dividends get reinvested. Assets are preserved due to low fees. And, yes, new money is attracted. All are offset by withdrawals.

I think asset appreciation is one of the most powerful parts of this story. Since Jan 2, 2009 (when most of these reports use as the start of V's explosive growth) the S&P has grown ~193% and the Nasdaq ~300%. Bonds have performed at 4%. Conservatively, one could assume Vanguard customers have seen a 100% blended increase in their portfolios since 2009 without investing a single new dollar.

Vanguard even discusses it here using 60/40 AA would get you to 117% increase 'trough to peak':
https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/InvComVanguardEffectBeyond

Vanguards $2T AUM would have naturally doubled to $4T. A large part of Vanguard's success has simply been growth of the markets rather than sucking business from other vendors.

 

[mathjak107]

can't say the exact reason , but in my opinion it certainly is not customer service .

 

[MRG]

I'v seen a lot of these articles lately and they seem to focus on Vanguard bringing in new money at the expense of other firms:



Not all of the increase can be attributed to new money. One factor is simply the appreciation of the market since the trough of the recession. Dividends get reinvested. Assets are preserved due to low fees. And, yes, new money is attracted. All are offset by withdrawals.

I think asset appreciation is one of the most powerful parts of this story. Since Jan 2, 2009 (when most of these reports use as the start of V's explosive growth) the S&P has grown ~193% and the Nasdaq ~300%. Bonds have performed at 4%. Conservatively, one could assume Vanguard customers have seen a 100% blended increase in their portfolios since 2009 without investing a single new dollar.

Vanguard even discusses it here using 60/40 AA would get you to 117% increase 'trough to peak':
https://institutional.vanguard.com/...commentary/article/InvComVanguardEffectBeyond

Vanguards $2T AUM would have naturally doubled to $4T. A large part of Vanguard's success has simply been growth of the markets rather than sucking business from other vendors.

Why wouldn't the same happen to the other big fund companies?

Prior to 2008 both fido and afs has more AUM than Vanguard. They should still be number 1&2 by that logic.

Instead their outflows became inflows to Vanguard.

 

[harley]

Vanguards $2T AUM would have naturally doubled to $4T. A large part of Vanguard's success has simply been growth of the markets rather than sucking business from other vendors.

But VG's AUM was only $1T in 2009, not 2. So it would have grown to $2T, leaving the other $3T to be considered inflow. That's a lot.

 

[GTFan]

can't say the exact reason , but in my opinion it certainly is not customer service .

Wouldn't that fall under the category of 'you get what you paid for'?

I certainly expect VG to have rock-bottom expenses and therefore don't expect that they'll have great CS. But I've only had to call them once in over 25 years of holding funds with them, so to me it's no big issue.

 

[Rianne]

can't say the exact reason , but in my opinion it certainly is not customer service .

Interesting, our experience is just the opposite.

 

[travelover]

Interesting, our experience is just the opposite.

 

[jetpack]

With $5T under management, it really makes me concerned if they ever run into problems. Their website seems so dated, I really hope their security infrastructure is much better. If they were to be hacked... oh my.