My wife and I have all our investments with Vanguard.
IRAs. College savings accounts. Regular investment accounts. They’re all there and they’re all invested in Vanguard funds.
Now, to be clear, there are plenty of good investment options out there and I don’t believe that Vanguard is always the right choice for everyone. Depending on your specific goals and needs, you may be better off somewhere else.
But there are some specific reasons why I chose Vanguard for myself and my family, and I’d like to share them today so that you can make a more informed decision when choosing your own investments.
Quick note: I have no affiliation with Vanguard, they are not paying me for this post, and honestly they have no idea I’m even writing it. This is 100% my personal and professional opinion based on my research and experience.
Vanguard’s big advantage
“Through Vanguard’s ownership structure, John Bogle has to be one of the biggest philanthropists of all time — without writing a check.” –Morgan Housel
Vanguard has a number of advantages that I’ll talk about below, but they all stem from what sounds on the surface like the driest, most boring topic imaginable:
Most investment companies, like most big companies around the world, are owned by shareholders and those shareholders naturally want to make money. So from a business perspective, the investment company’s incentive is to charge higher fees in order to maximize the profit they pass on to their shareholders.
But Vanguard is different.
When John Bogle founded Vanguard in 1974, he set it up so that Vanguard was owned by its customers.
When you buy shares in a mutual fund, you become a part owner of that fund. And at Vanguard the entire company is owned by its mutual funds, meaning that you as an individual investor also become a part owner of the entire company when you invest in a Vanguard fund.
So, what does that mean?
It means that there are no outside owners to appease. It means that business decisions are made for the benefit of Vanguard’s customers. It means that profits are distributed to customers in the form of lower fees.
No other mutual fund provider works this way. And that difference leads to some pretty big advantages.
Cost is an indicator of quality with many things. If you want a better car, or better clothes, or a better laptop, you generally have to pay more money.
And it turns out that cost is also the single best predictor of future investment returns. It’s just that it’s the LOWER cost investments that turn out to be the highest quality.
The less an investment costs, the more likely it is to produce superior returns.
So while it’s not the only factor I consider, keeping costs to a minimum is one of the most important parts of my personal investment plan.
And the fact of the matter is that Vanguard has continually set the standard for reducing the amount of money investors have to pay.
Other companies offer low-cost investments here and there, and those are absolutely worth considering as you put your plan together. But Vanguard is the only company I’ve seen that consistently minimizes fees across the board, no matter what type of fund you’re talking about.
It’s a big part of their company mission, and the reason for that comes back to the ownership structure. When the customers own the company, the incentive is to minimize fees. Without external shareholders to pay, there are no conflicts of interest.
So I not only appreciate the low-cost funds that Vanguard offers today, but I trust that they will continue to be the leader in reducing costs going forward. Which should lead to better returns for me and my family.
They basically invented index funds
I’m a huge fan of index investing, both because it’s incredibly simple and because the best research we have says that it’s the most effective way to invest.
And while Vanguard technically didn’t invent the index fund, John Bogle did create the first index fund ever available to the public in 1975, and Vanguard is largely responsible for the incredible growth of high-quality, low-cost index funds available today.
In other words, Vanguard pioneered index investing and they continue to lead the way. There’s a reason that the biggest independent robo-advisors build their portfolios primarily with Vanguard’s index funds. It’s because they’re good.
Other investment companies have followed suit and plenty of them now offer high-quality index funds as well. But my money’s with the company that’s been doing it for decades.
Having all of my investments with Vanguard makes my life simpler.
I only have to log in to one website to check on my portfolio.
I don’t have to worry about trading fees because there are no trading fees when I use Vanguard’s funds.
They offer every account type I’ve needed so far (and can foresee needing).
They even offer a number of all-in-one funds, just in case I want to keep things really simple.
All of that makes investing as easy as possible, which means that I can spend less time sweating the details and more time on the things that will really move me forward.
It all comes back to trust
I like working with companies I trust to do right by me. And when it comes down to it, that’s the main reason I like investing with Vanguard.
Yes, the funds are good. Yes, the fees are low. And yes, I get to have everything in one place. All of that is important.
But more than anything, I trust that those things will continue to be true going forward. And that makes me confident that my investments are on the right track.