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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

#211

Post by bluGill »

kolbe wrote: post #162
headmelted wrote: post #125

As a Vanguard customer, I can understand why people are so enthusiastic about their products, and have known for a while that passive investment, and Vanguard in particular, was growing while active management was on the decline. At no point did I think the difference in inflows was anywhere close to 8.5x. And it does worry me. I'm familiar with the contention that even having some active players in the market will a…

> the less active money there is around, the less accurate our concept of a correct value can be The problem is deeper than that. Active shareholders actually give a shit about corporate governance. Collectively, they put honorable and competent people on the board of directors, and make sensible decisions when other issues are put to shareholder votes. Vanguard and other indexing funds could barely care. Their incen…

Actually Vanguard claims they care more: active investors will get out if things go bad - they might even make decisions that are good short term bad long term. Vanguard is in for the long term so they care more. One of the things Vanguard can do is ensure good management is in place.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#212

Post by matwood »

silverpikezero wrote: post #61
yalogin wrote: post #59

Vanguard is the reason why Betterment and wealth front never made any sense to me. There is no way they can be better than just putting in vanguard funds myself. I still do t understand what their value proposition is.

Tax Loss Harvesting. This is the sole reason why Betterment(/Wealthfront) is superior to Vanguard. The benefits of this technique more than offset any fees they charge.

TLH only comes into play with taxable accounts. I would bet a lot of VGs AUM is from tax advantaged accounts.

Even in taxable accounts TLH is really oversold. It's another way to shift taxes around, which can be good, but the obvious methods of maxing out tax advantaged accounts should be done first.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#213

Post by zeroer »

xwvvvvwx wrote: post #19

If all vanguard does is buy (not pick) stocks for you, why wouldn't you just skip the fee and buy the stocks yourself?

Tracking indexes and buying and selling stock is not free in time or money. And the fees Vanguard charges for doing so are quite marginal. It probably doesn't make sense to even think about doing something like that until AUM is $10MM+. For more pedestrian account balances, if one wanted a market cap-weighted portfolio, one wouldn't even be able to purchase a single share of a huge swath of companies.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#214

Post by nommm-nommm »

chillydawg wrote: post #112
SwellJoe wrote: post #89

Earlier quoted context omitted.

I don't understand how companies like that can thrive (but many do). If I have to pick up the phone to solve a problem even once, I'm angry. If I have to call them twice, I'm looking at alternatives. I may decide not to switch if the alternatives are even worse...but, I'm looking to get out of the shitty relationship I find myself in with that company. (This frustration is fresh in my mind because Security Metrics ju…

Because their product is SO SO SO much better than the alternative, it's worth the hassle.

Not really. They aren't better than Fidelity or Schwab for the vast majority of people, their brokerage accounts are all very, very similar.

Plus Schwab and Fidelity both offer better additional products. Both offer totally free, no catches, ATM reimbursement, no minimum balances, no fees alternatives to a checking account. Fidelity also offers a no annual fee 2% cash back on everything credit card.

Vanguard has a different cooperate structure, however, if that's important to you.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#215

Post by hesdeadjim »

zeroer wrote: post #207
hesdeadjim wrote: post #190

Earlier quoted context omitted.

I've got a fair bit of money in Wealthfront and tax loss harvesting has directly saved me quite a bit of money over the last couple years. For instance, the beginning of last year was tumultuous and their tax loss harvesting let me realize around ~55k in losses. The market then shot back up and my investments were right back where they were barely a month later. Because I had a source of capital gains in 2016, I basi…

I'm really talking about what happens after you've been invested with them for over a decade. Wealthfront has not yet existed for 10 years, so I know you haven't had your money invested with them for that long. The fact that tax loss harvesting can be beneficial is not in question. Once you tax loss harvest once, you lower your cost basis on the investment to less than you originally paid. You can only subsequently t…

Oh gotcha with the cost basis raising over time. I wonder what strategies you could use to mitigate that. Perhaps buying a similar asset, holding that instead of the other, wait for the original to go down, and then re-purchase. Seems fragile and risky of course...

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#216

Post by bluGill »

runeks wrote: post #11
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 inde…

Vanguard is the incumbent in index funds. They invented them, and it was many years before anyone else offered them.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#218

Post by rsync »

headmelted wrote: post #166
dsacco wrote: post #159

Earlier quoted context omitted.

I think the parent commenter is more concerned about the economy's overall stability, and believes passive investors could be exploited due to mis-pricing index fund underlyings. I didn't interpret it as a worry about missing out on active investment, but I could be wrong.

^^ Effectively this. My concern is that if everyone is in the passive investing boat then we're no longer following the market, we're making the market, and it's a big departure from the philosophical under-pinnings behind the idea of passive investing. (We started out letting active players make the market by placing good/bad bets and winning/losing. We got a market that was at least trying to find the right price a…

"My concern is that if everyone is in the passive investing boat then we're no longer following the market, we're making the market, and it's a big departure from the philosophical under-pinnings behind the idea of passive investing."

I'm intrigued by your suspicion ... but I can't put my finger on the exact manner that this might play out ... it's really hazy.

It seems to me that the effect of everyones money going into index funds would be that firms large enough to be in the index would have less and less pressure to issue dividends ... if there is a ready market of buyers of your stock based solely on your size then why bother ?

If money flows, by autopilot, into an asset class wouldn't we expect that asset class to return less and less as time goes on ?

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#219

Post by matt_wulfeck »

postozoan wrote: post #149
headmelted wrote: post #125

As a Vanguard customer, I can understand why people are so enthusiastic about their products, and have known for a while that passive investment, and Vanguard in particular, was growing while active management was on the decline. At no point did I think the difference in inflows was anywhere close to 8.5x. And it does worry me. I'm familiar with the contention that even having some active players in the market will a…

Yeah, the slow and steady rise of stock prices across the board is in large part just an effect of increased money supply. Sure, lifting along with that passively is cheap and reliable way to make money. But since these types of passive investments care little about how efficiently the beneficiaries make use of these investments, there's the danger that inefficient companies end up with too much capital. If that happ…

> there's the danger that inefficient companies end up with too much capital

I can't see why this is any kind of danger. Companies end up subjectively with "too much capital" all of the time in this market without being part of a large index. Look at tesla.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#220

Post by jalopy »

bluGill wrote: post #211
kolbe wrote: post #162

Earlier quoted context omitted.

> the less active money there is around, the less accurate our concept of a correct value can be The problem is deeper than that. Active shareholders actually give a shit about corporate governance. Collectively, they put honorable and competent people on the board of directors, and make sensible decisions when other issues are put to shareholder votes. Vanguard and other indexing funds could barely care. Their incen…

Actually Vanguard claims they care more: active investors will get out if things go bad - they might even make decisions that are good short term bad long term. Vanguard is in for the long term so they care more. One of the things Vanguard can do is ensure good management is in place.

But then that would be active management. This is something Vanguard expressly does not do.
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