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Vanguard's average fee is now 0.07% after biggest-ever cut

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Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#51

Post by kasey_junk »

toast0 wrote: post #22
2OEH8eoCRo0 wrote: post #18

Earlier quoted context omitted.

How do you front run a mutual fund? The price is the price.

Predict or react to index changes faster than the funds that are compelled to follow the index. But you can't front run shares of mutual funds; they always trade at close of business at NAV. You could potentially front run ETFs, but if you're worried about that, you can use limit orders and get the price you want or not transact. As long as you use a competent broker that offers limit orders.

That’s not front running! Front running requires a fiduciary obligation to who you are trading on behalf of.

Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#52

Post by recursive »

edmundsauto wrote: post #34
op00to wrote: post #16

Earlier quoted context omitted.

Only if you get caught. And the fine needs to be higher than the profit.

I think the fine needs to be higher than the profit difference between the (illegal) and not illegal option. If you have a legal route to $1M and an illegal route to $1.5M, the rational calculation for fines is against the $0.5M delta, not the full amount.

Only if they're mutually exclusive.

Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#54

Post by robszumski »

whitepoplar wrote: post #23
ilamont wrote: post #3

Not mentioned in any of the coverage I've seen (or the interview with Vanguard's new CEO in the WSJ) is Fidelity. Fidelity used to be known for actively managed funds, but has been eating Vanguard's indexing lunch for the past 10 years or so. Part of this relates to its dominance in workplace accounts, but Vanguard hasn't helped itself with some bad customer-facing software updates and a perception that its service l…

Fidelity's "Zero" funds are great, but only for specific scenarios IMO. They can't be held outside Fidelity accounts, so what happens if you get caught up in some KYC nonsense and Fidelity closes your account? Are you forced to liquidate and incur capital gains? There are also some embedded tax efficiencies inherent to ETFs, like 351 exchanges, which aren't popular now, but may become popular in the future. TBH, this…

The zero fund I am familiar with (FZILX) has a once-a-year dividend schedule which I'm sure nets them a lot of money, vs paying out more frequently. If you want to unload, you can only do it once a year without throwing away your earned dividend.

Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#55

Post by giantg2 »

ElevenLathe wrote: post #46
londons_explore wrote: post #32

Earlier quoted context omitted.

But does that structure confer any realistic chance of voting control by any real humans who aren't already employed by vanguard? Funds aren't known for being voting activists.

Even so, I think the incentives are still for the Vanguard management to make as little profit as possible so that they can compete and have more funds under management. Controlling more billions of dollars of stock shares is kind of its own reward and brings many opportunities for enrichment, and if they don't have to worry about making money for shareholders, they can pretty much always engineer the lowest fees.

Yes, in theory the fund-owned structure should mean they can charge lower fees than profit driven competitors. However, if competitors are doing things like zero fee funds as loss leaders, or have a banking side to diffuse costs, then it gets less clear.

Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#56

Post by 2OEH8eoCRo0 »

lotsofpulp wrote: post #53
2OEH8eoCRo0 wrote: post #28

Earlier quoted context omitted.

An index fund is a type of mutual fund

Wouldn’t index ETFs be index funds that are not mutual funds?

Yes and they trade during market hours the same as stocks so I understand front running those trades.

Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#58

Post by benreesman »

kasey_junk wrote: post #45
NickC25 wrote: post #21

Earlier quoted context omitted.

In finance, nothing is illegal if the profits outweigh the fines. Citaldel paid handsomely for order-flow information from Robinhood. They made a lot of money off retail traders. They paid a fine IIRC equivalent to a few day's profits.

PFOF is neither front running nor illegal. If you are curious about a brokers position on PFOF you can look up their disclosures. SEC Rule 605, 606 and 615 are the search terms you want when looking these up. Fidelity has a similar disclosure on this as Vsnguard, which is that they don’t engage in PFOF except for some options markets. Robinhood got in trouble for false advertising about PFOF not because they engaged…

PFOF isn't (typically) illegal, a better word might be "controversial". There's nothing free in this life: the zero commission brokers are making it up somehow.

While the studies on how PFOF effects execution quality are varied, this summary [1] from Wharton seems fairly balanced. It's not as simple as citing NBBO and moving on.

Personally I'm suspicious of the practice mostly because of the pretty clear conflicts of interest that it creates. Again, this is controversial, but the people arguing it's ok are for the most part making money from it.

[1] https://wifpr.wharton.upenn.edu/uncategorized/research-spotl...

Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#59

Post by toast0 »

kasey_junk wrote: post #51
toast0 wrote: post #22

Earlier quoted context omitted.

Predict or react to index changes faster than the funds that are compelled to follow the index. But you can't front run shares of mutual funds; they always trade at close of business at NAV. You could potentially front run ETFs, but if you're worried about that, you can use limit orders and get the price you want or not transact. As long as you use a competent broker that offers limit orders.

That’s not front running! Front running requires a fiduciary obligation to who you are trading on behalf of.

Investopedia disagrees:

> A form of front-running in index funds is common and isn't illegal.

> Index funds track a financial index by mirroring the index's portfolio. The composition of the index changes periodically to balance it accurately as the stocks that make it up change dramatically in price or as stocks are added or removed from the index. That forces the fund's managers to buy or sell some components of the index.

https://www.investopedia.com/terms/f/frontrunning.asp

Re: Vanguard's average fee is now 0.07% after biggest-ever cut

#60

Post by NegativeLatency »

kasey_junk wrote: post #15
wing-_-nuts wrote: post #7

Earlier quoted context omitted.

TBH, I trust vanguard more, even if their website is absolutely worse. There's a saying, 'if you're not the customer, you're the product'. I expect trades on those index funds are getting 'front run' much like robinhood is getting front run. You might have a lower ER but your nav might effectively be higher when buying and lower when selling. Of course, I'm a 'buy and hold' investor so this doesn't really effect me m…

Front running is illegal.

The riskier the road, the greater the profit.
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