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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

#261

Post by cschmidt »

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?

Schwab recently introduced much lower fees on their index ETF's. According to this, they're lower or equal to Vanguard (depending on how much you invest).

https://www.schwab.com/public/schwab/nn/m/indexfunds.html

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#262

Post by ctkrohn »

malchow wrote: post #197
lr4444lr wrote: post #154

Earlier quoted context omitted.

If you're a Vanguard customer (buying the flagship fund classes, I presume), you're expressing faith in CAPM[0] and EMH[1] on a significant level. Some active investors will probably in the long term scoop up some extra gains, but the question still remains: which of them, over what time horizon, and is that a risk you want to take? Vanguard gives you lots of no-commission funds with 1 day liquidity even in the mutua…

Say more. Why do I believe in the Capital Asset Pricing Model and Efficient Markets (both proven wrong) if I invest in Vanguard's cheap S&P 500 ETF? I invest in their S&P 500 ETF because it's the cheapest way to get diversified exposure to the 500 largest American companies, and I believe that the 500 largest American companies will be more valuable in the future as a combination of valuation, scale, and cash flows t…

If the Efficient Markets Hypothesis (in its stronger forms) is false, there should be managers who are able to identify the cheapest stocks within the S&P 500 and thereby outperform the index. A disbeliever in EMH should look to identify these managers and pay them some fee, rather than simply investing in the index and trying to minimize fees.

I think it's plausible that these managers exist, but they're impossible to identify ex ante. Furthermore, a smart manager will charge fees that are equal to the alpha they generate. So even if the EMH is false in some broad sense, individual investors should act as if it were true and simply invest in low-cost diversified funds.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#263

Post by marcosdumay »

kolbe wrote: post #246
marcosdumay wrote: post #167

Earlier quoted context omitted.

Yet, this is a general problem of all kinds of investment funds, not only of index ones. It is a huge problem (and probably responsible for much of the lawlessness we can find on Wall Street), but the switch from active to passive investment shouldn't change a thing.

It's not necessarily active vs passive. It's skin in the game vs no skin. Low fee index funds offer no incentive for the managers to do any actual managing. They follow an equation, and collect a few bps.

Yes, it's not even that simple. It's about having enough skin on the game.

No big fund manager has enough skin on the game. That has been true for most of last century and all of the current one, and the expected results are visibly there.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#264

Post by nommm-nommm »

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?

>My understanding is that Vanguard's expense ratio is the best

Not true.

http://www.investors.com/etfs-and-funds/look-whos-got-the-lo...

>The $96.4 billion Fidelity 500 Index Fund (FUSEX), which tracks the S&P 500 Index, will drop its annual expense ratio by 0.5 basis point. The gross fee is now 0.10%, with a current net fee of 0.095% due to fee waivers. That will fall to 0.09% on July 1. In comparison, $45 billion Vanguard 500 Index Fund (VFINX) has an expense ratio of 0.16%

https://www.nerdwallet.com/blog/investing/vanguard-vs-fideli...

Fidelity also offer iShares ETFs (also low expense funds) as well as their own low expense ETFs commission free.

I can't comment on Schwab because I don't use them but from what I hear they have very similar offerings for low cost mutual funds and ETFs.

There was also just a commission price war a month or so ago initiated by Fidelity and as a result most brokerages dropped their commission significantly.

From what I understand Vanguard offers more services if you have a profolio over $1 million.

I'm very happy with Fidelity. I only purchase low cost index ETFs through them. You're going to pay more if you want active managed funds, but that's not the topic of discussion.

Even if you don't use their brokerage services you should use either Fidelity or Schwab's checking account. Really, a no brainer, banks don't offer anything even close to as good.

It's very competitive market nowadays and as another commenter pointed out, Fidelity has a much better website.

EDIT: What I meant by "their brokerage accounts are all very, very similar" I really mean "their brokerage account offerings are all very, very similar in price for someone interested in investing in low expense ratio index funds."

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#265

Post by quantumhobbit »

I seems like there should be an opportunity for active investors to make money off of all the passively managed money.

All I can think of would be to take advantage of the margin of the index. For example buy stock #501 and a discount and sell when it crosses into the sp 500 since vanguard will prop up the price by buying it for tge index fund. Similarly shorting #499.

I'm sure that the market has gotten more sophisticated than this though. So how does it work in practice?

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#266

Post by tanderson92 »

sf_rob wrote: post #257
zeroer wrote: post #143

Earlier quoted context omitted.

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 rat…

Yes, but this only works for those who are exploiting a difference between their marginal tax rate and the LTCG rate. That is, those in the 15% marginal bracket whose LTCG rate is 0%. For other investors it is preferable to pay no taxes (continue to hold the security long-term even after it qualifies for long-term tax treatment)

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#267

Post by tanderson92 »

icelancer wrote: post #62
nabaraz wrote: post #36

Earlier quoted context omitted.

It's relatively new. They have no site, trading and research tools, investing plans etc. Most of the big brokers offer commission free trades on ETF's and mutual funds.

Can you name a few that support commission-free trades on ETFs/Mutual Funds for Roth IRA accounts? Can't find one using Google. Thanks.

Merrill Edge if you have sufficiently high account balance (>$50k) allows 30 free ETF and stock trades per month. There are nice credit card bonuses with BOA CCs, too.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#268

Post by tanderson92 »

lingben wrote: post #69
watertorock wrote: post #20

Could vanguard become too big too fail? Is that a legitimate risk?

no, they are an asset manager, not bank or other credit/lending inst

And they don't actually hold the stocks in their fund; they are held in trust at JPM depository trust.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#269

Post by tanderson92 »

quantumhobbit wrote: post #265

I seems like there should be an opportunity for active investors to make money off of all the passively managed money. All I can think of would be to take advantage of the margin of the index. For example buy stock #501 and a discount and sell when it crosses into the sp 500 since vanguard will prop up the price by buying it for tge index fund. Similarly shorting #499. I'm sure that the market has gotten more sophist…

Look here: https://personal.vanguard.com/us/funds/snapshot?FundIntExt=I...

The Vanguard S&P500 index fund currently contains 511 stocks. Even the S&P500 index itself holds 505 stocks.

Re: Vanguard Is Growing Faster Than Everybody Else Combined

#270

Post by zeroer »

sf_rob wrote: post #257
zeroer wrote: post #143

Earlier quoted context omitted.

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 rat…

Yea, tax gain harvesting is definitely something you can do. Though it's harder than tax loss harvesting. You have to take into account the entirety of a person's tax situation to do it, as opposed to tax loss harvesting, which only require knowledge of the account transaction history, which Betterment and Wealthfront of course have. To do tax gain harvesting you have to wait until late December when you have most of the information, and you essentially have to complete an entire tax return.
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