Vanguard Is Growing Faster Than Everybody Else Combined • Hacker News Board

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#251

Post by jackcosgrove » Wed, Apr 19, 2017, 4:31 PM UTC

bluGill wrote: post #224

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…

Vanguard is not as passive as you think. they don't trade often, but they do trade. Their S&P500 fund doesn't just hold stocks in the S&P500, it also holds other stocks that could have been but S&P500 had S&P not limited the index to 500 stocks. Vanguard fund managers regularly make active decisions on what stocks to buy/sell. Vanguard is not nearly as active is most mutual funds, but they are not entirely passive ei…

Active and passive are just marketing labels. The frequency of trades should be correlated with the expense ratio. If you do more trades, you better be hiring more analysts to figure out those trades.

Vanguard has lower costs because it employs fewer people to execute fewer trades. That's all I really care about.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#252

Post by atemerev » Wed, Apr 19, 2017, 4:34 PM UTC

dlubarov wrote: post #87

atemerev wrote: post #68

Of course. There wasn't a significant recession since 2009. It is psychologically very easy to buy into a rising market. When the next (inevitable) correction happens, the tide will change and stock pickers will return to the spotlight. (It might be not rational, of course. But markets are never rational. They are efficient — efficient in projection of our hopes and fears).

I don't think market conditions have much to do with it. Whether to invest in the market, or in a certain asset class, is a separate decision from whether to pick stocks or buy a passively managed fund. Passively managed money has been increasing because there are more low-cost funds available, and lots of education about stock picking versus passively managed funds (e.g. Warren Buffet, A Random Walk).

Well, the question is scientifically valid.

My theory predicts that when the next major recession happens, Vanguard and other passively managed funds will become dramatically less popular (which will amplify the fall), and actively managed funds will come back.

Your theory predicts that none of this will happen when recession strikes.

So, I propose we wait and see. :)

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#253

Post by [deleted] » Wed, Apr 19, 2017, 4:43 PM UTC

sytelus wrote: post #191

udev wrote: post #179

Earlier quoted context omitted.

New money into ETFs does not necessarily mean new money into the market. A big part of that is money just switching from actively managed mutual funds to passive index funds, e.g. recently pension funds in some states.

Active strategy may be investing in small/mid caps, currency, commodities, bonds, emerging markets and so on. Lot of that money would be pulled in to biggest popular indexes now such as S&P 500.

[deleted]

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#254

Post by Chaebixi » Wed, Apr 19, 2017, 4:48 PM UTC

SwellJoe wrote: post #89

ilyagr wrote: post #22

Vanguard seems to have gone a bit too far with cost-cutting in the customer services department. One of my most frustrating recent experiences was dealing with Vanguard's website and customer service. There were all kinds of issues, some minor annoyances, others serious time sinks. Here's an excerpt from a long and boring story: ... One day, I couldn't log in to their website. Attempting to go through "forgot my pass…

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…

> 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 to get out of the shitty relationship I find myself in with that company. [emphasis mine]

You are way too sensitive and demanding, IMHO. You're probably a developer: is this how you want people thinking of you when you inevitably push a bug? I can understand looking elsewhere after a pattern of problems and repeated frustration with no improvement, but getting pissed off just because you have to talk to someone one or two times is just unreasonable. Have a little empathy for the people on the other side.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#255

Post by nickjarboe » Wed, Apr 19, 2017, 4:48 PM UTC

lr4444lr wrote: post #240

alex8022 wrote: post #225

Earlier quoted context omitted.

But then, say you come a long with a new company going public... you're not large enough to be in the S&P 500, so if everyone only invests in S&P 500 index funds, no one will buy your stock. Similarly, if you're Apple (the largest company), and you have a really bad quarter, say you lose $100B, no one would sell your shares, because they're passive investors. Obviously, these are edge cases (we'll never be 100% passi…

It's a perfectly valid question. In my very cautious humble opinion, I think what it means is that the style/size matrix[0] will get squeezed more into a single spectrum: large companies will be pressured into stabilizing and delivering dividends and small ones will compete to grow large enough to get a piece of the passive investment gravy train. Apple can have a bad quarter, but it's just one company. It can't keep…

As per the article, Vanguard's biggest fund is the Vanguard Total Stock Market Index which tries to track the CRSP U.S. Total Market Index. That index is "Nearly 4,000 constituents across mega, large, small and micro capitalizations, representing nearly 100% of the U.S. investable equity market." I don't think you have to worry much about a bifurcation between large and small companies. My worry would be that the "investable equity market" is shrinking and that most the growth in the future will come from companies pre-IPO where non-accredited investors cannot invest.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#256

Post by tarlinian » Wed, Apr 19, 2017, 4:50 PM UTC

ellyagg wrote: post #248

nommm-nommm wrote: post #214

Earlier quoted context omitted.

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 di…

I'd love to hear a case made for Fidelity/Schwab being even with Vanguard. My understanding is that Vanguard's expense ratio is the best (and it goes without saying this makes a big difference over time). Has Fidelity's expense ratio recently moved to match Vanguard's?

https://www.fidelity.com/mutual-funds/investing-ideas/index-...

This is obviously a Fidelity marketing spiel...but it's not a lie...Fidelity's active funds (which they made their name on) are definitely more expensive than Vanguard, but if you buy their passive index funds, you basically get equivalent expense ratios. (Same is true at Schwab.) And IMO, their website is far better than Vanguard's. I'll give Vanguard credit for jump starting passive investing for the little guy, but they aren't significantly different than their competition anymore.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#257

Post by sf_rob » Wed, Apr 19, 2017, 4:51 PM UTC

zeroer wrote: post #143

acchow wrote: post #129

Earlier quoted context omitted.

False - this is not how tax loss harvesting works. Even if you are in the black every year, you can still benefit from it.

That is exactly how tax loss harvesting works. Here's a quote from Betterment: "What is Tax Loss Harvesting? Tax loss harvesting is the practice of selling a security that has experienced a loss." https://www.betterment.com/tax-loss-harvesting/

Couldn't they employ tax gain harvesting for users that are interested in the short/long term capital gains differential in TLH? They don't do this, but I'm curious.

i.e. cycle long term gains after one year of ownership so that they are more likely to produce harvestable losses in the next year. Obviously this prevents the basis gains of TLH, but wouldn't it be dwarfed for users whose long-term capital gains tax rate is much lower than their short-term capital gains rate?

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#258

Post by uiri » Wed, Apr 19, 2017, 4:53 PM UTC

lmm wrote: post #123

pg314 wrote: post #72

Earlier quoted context omitted.

That the stock market is an efficient mechanism in allocating capital to the right businesses is a myth. For one, the stock price of a company has no direct bearing on its capital. Only at IPO time or when a company is raising additional capital is the stock price relevant for the capital. E.g. Google's stock price has increased 15x since their IPO, but that has had no effect on their capital. Any other time besides…

> the stock price of a company has no direct bearing on its capital. Only at IPO time or when a company is raising additional capital is the stock price relevant for the capital. E.g. Google's stock price has increased 15x since their IPO, but that has had no effect on their capital. Any other time besides the IPO and when raising additional capital, it is just money changing hands between stockholders, the company d…

No, the decision is in the context of the market capitalization, not the stock price. If $10M company has a share price of $50/share, then it has 200,000 shares outstanding. If it has a price of $100/share, then it has 100,000 shares outstanding. A buyout, merger or acquisition is based on the total value of the company, not based on the smallest unit of ownership in that company.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#259

Post by atishd » Wed, Apr 19, 2017, 4:56 PM UTC

nickjarboe wrote: post #255

lr4444lr wrote: post #240

Earlier quoted context omitted.

It's a perfectly valid question. In my very cautious humble opinion, I think what it means is that the style/size matrix[0] will get squeezed more into a single spectrum: large companies will be pressured into stabilizing and delivering dividends and small ones will compete to grow large enough to get a piece of the passive investment gravy train. Apple can have a bad quarter, but it's just one company. It can't keep…

As per the article, Vanguard's biggest fund is the Vanguard Total Stock Market Index which tries to track the CRSP U.S. Total Market Index. That index is "Nearly 4,000 constituents across mega, large, small and micro capitalizations, representing nearly 100% of the U.S. investable equity market." I don't think you have to worry much about a bifurcation between large and small companies. My worry would be that the "in…

The number of total publicly traded companies isn't projected to get anywhere close to historical levels in the near future. There are steps being considered to change the current definition of accredited investors and/or to permit non-accredited investors to participate in private investments. See helpful reading/viewing:

- http://www.investmentnews.com/article/20170224/FREE/17022994... - https://equityzen.com/blog/alternatives-part-of-investment-p... - http://video.cnbc.com/gallery/?video=3000598150

Disclaimer: Links #2-3 are affiliated with my own company, so you should decided whether or not to believe me.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#260

Post by uiri » Wed, Apr 19, 2017, 4:56 PM UTC

StavrosK wrote: post #134

peferron wrote: post #109

Earlier quoted context omitted.

Can you request an ITIN?

I don't know what that is, I'm afraid. Is it something Vanguard would provide? If it's a US government thing, I don't live in the US, I would just like to invest in index funds (so anything that resembles Vanguard is fine with me).

SSNs are issued by the Social Security Administration for the purposes of keeping track of social security (read: government-backed retirement pension). The Internal Revenue Service keeps track of taxes and uses SSNs to keep track of all taxes (including payments into social security).

Some individuals (such as yourself) are not eligible to receive a SSN. For those individuals who need an identification number for US tax purposes, the IRS issues ITINs. See here for more information: https://www.irs.gov/individuals/individual-taxpayer-identifi...