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Vanguard Is Growing Faster Than Everybody Else Combined

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Re: Vanguard Is Growing Faster Than Everybody Else Combined

#11

Post by runeks »

debatem1 wrote: post #3

This feels like an article that will be shown for irony points in a documentary about Vanguard's collapse a few years from now.

It's also possible that Vanguard just delivers the same products as their competitors, just at a significantly lower price (management cost).

Keep in mind also that "growing" in this context doesn't refer to huge profits (as far as I know). As far as I can see, as a non-expert, Vanguard just offers the same products as everyone else, except at half the yearly management cost. I mean, when you're looking for some index fund, and Vanguard is one third the cost, is it any surprise they're taking away customers from the incumbents?

EDIT: For example, here's TLT (0.15% p.a.) vs Vanguard's long term bond etf (0.07% p.a.): https://personal.vanguard.com/us/funds/snapshot?FundId=3144&... https://www.ishares.com/us/products/239454/ishares-20-year-t...

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#12

Post by tim333 »

NTDF9 wrote: post #9

Here's a question for someone more savvy than me. What happens if the vast majority of stock investments end up in vanguard funds? In an economic crises, will everyone try to sell the same set of funds and will crash the funds themselves?

If everyone sells then the market will go down as it does now. It doesn't make much difference if that happens via a fund holding or not.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#14

Post by etherael »

kevindong wrote: post #4
debatem1 wrote: post #3

This feels like an article that will be shown for irony points in a documentary about Vanguard's collapse a few years from now.

Why do you say Vanguard will collapse?

Thought experiment.

Imagine you have a class full of studious and competent students, they do well on exams and generally display the performance characteristics and output you'd expect from a class full of studious and competent students.

Then the rules change. From here on in, plagiarism is no longer a code violation. The obvious happens, everyone copies from the smartest kid in the class, measured by the heretofore pretty reliable indicators of proficiency built up in the previous system.

But the next year comes along, and everyone's just that little bit less certain who the smartest kid in the actual class is, so instead they start measuring by how rich his father is, or how confident he sounds when he makes his declarations.

Iterate the system a few generations, and although the first iteration will indeed result in better results across the board for all students, as people become more and more unhinged from the underlying realities of scholastic performance for students as they come and go through the system, would it not stand to reason that eventually you're just going to have a bunch of idiots copying people who yell the loudest, and seem the most like they're successful?

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#15

Post by virmundi »

konschubert wrote: post #8

I wouldn't be surprised if most of the money was coming from people's savings books. With zero interest rates, the next best thing to store one's savings is an ETF. I feel like the increase in stock prices in the recent years is caused by this demand, not by an increase in productivity. The sinking ROI of dividend-driven stocks is an indicator for that.

It's not just the proletariat's savings. It's eveyone's. Some places have negative rates. You pay the bank. This means that money had to go some where. We have it in the market. As a result smart people and dumb people like me have waited for the market to adjust down 25% or more. I lost 2k on a market short ETN.

Given the amount of money just looking for a home the market has no where else to go but up until that money stops.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#16

Post by [deleted] »

konschubert wrote: post #8

I wouldn't be surprised if most of the money was coming from people's savings books. With zero interest rates, the next best thing to store one's savings is an ETF. I feel like the increase in stock prices in the recent years is caused by this demand, not by an increase in productivity. The sinking ROI of dividend-driven stocks is an indicator for that.

[deleted]

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#17

Post by tim333 »

debatem1 wrote: post #10
kevindong wrote: post #4

Earlier quoted context omitted.

Why do you say Vanguard will collapse?

Post hoc ergo propter hoc. Articles like this showed up for Enron and MCI/WorldCom and all the others, extolling one virtue or another and showcasing their success. Now we have one for Vanguard, ergo it will fail. I'm not serious, of course. But pride does seem to come before the fall, and just out of an excess of caution I might move some money out of my vanguard funds next week.

You've got to take in to account that Vanguard doesn't actually do much - just buy stocks on your behalf and charge 0.12% for doing so. If it stopped doing that because some other operator was doing it for 0.08% it wouldn't be a big deal.

The bigger deal would be if the general market collapsed for some reason but that would affect everyone, not just Vanguard.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#18

Post by slededit »

NTDF9 wrote: post #9

Here's a question for someone more savvy than me. What happens if the vast majority of stock investments end up in vanguard funds? In an economic crises, will everyone try to sell the same set of funds and will crash the funds themselves?

Active traders will have an outsized impact on the movement of stocks. Which could allow for fun games in the derivatives market. E.g. force a stock up and short it in a derivative. This kind of activity was much easier in the past so its not unprecedented.
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