Why All My Investments Are With Vanguard

Why All My Investments Are With Vanguard

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:

Ownership structure.

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.

Rock-bottom fees

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.

Simplicity

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.

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36 Comments... Read them below or add one of your own
  • Kate @ Cashville Skyline August 16, 2016

    I’ve been investing in index funds with Vanguard for several years, and I’m really happy. It’s simple, inexpensive, and gets results. What else do you need?

  • Matt @ Optimize Your Life August 16, 2016

    I have most of my investments with Vanguard for the same reasons that you stated. We’ve decided to keep my wife’s IRA with Fidelity, however. Fidelity holds her employer-sponsored 401k, so keeping it there makes rollovers and transfers easier. Plus, Fidelity has gotten around to offering low cost index funds to compete with Vanguard. I think I’d prefer having everything with Vanguard because of the corporate structure, but for now we’ve decided it makes sense to leave some with Fidelity.

    • Matt Becker August 16, 2016

      Good stuff! There are plenty of good options available, and you’re absolutely right that a lot of companies offer low-cost index funds now. Nothing wrong with a little mixing and matching.

  • Girija Unnikrishnan-Rema August 16, 2016

    I am still a novice as far as investment is concerned. So have been reading as much as of the investment related books and blogs. Very few blogs present the ideas/facts straight to the point. Momanddadmoney.com is one such. Great job and thank you!!

    • Matt Becker August 16, 2016

      Thanks so much Girija! I really appreciate the kind words.

  • Tracy August 16, 2016

    If they just wouldn’t have cancelled the Coverdell ESA plans. Sigh. I had to go with a different company for that part of my investment strategy. Otherwise, I agree with and keep all that I can at Vanguard myself! 🙂

    • Matt Becker August 16, 2016

      Yeah, that’s definitely unfortunate. I wish there were more providers offering those accounts.

  • Andrew@LivingRichCheaply August 16, 2016

    I’m also a big fan of Vanguard. I used to have a very small fear…but still a fear thinking “what if something were to happen to Vanguard?!” If I had all my money there, I’d be devastated! But I read a blog post of the Oblivious Investor who interviewed someone from Vanguard who went over those fears. Here’s the link just in case you or your readers may be interested:
    http://www.obliviousinvestor.com/is-it-safer-to-use-multiple-fund-companies/

    • Matt Becker August 16, 2016

      Thanks for the link Andrew! I definitely see that question asked a lot.

  • John August 16, 2016

    We, too, are with Vanguard for everything except for our emergency savings. I would love to have it there, too, but their money market rates are pretty poor.

    Other than that, I love Vanguard and would strongly recommend them (and have) for anyone.

    John

    • Matt Becker August 16, 2016

      Good point. We have our emergency savings elsewhere as well.

  • GEORGE GILLESPIE August 16, 2016

    My wife and I have all of our investments with Vanguard and have been with the for over 35 years. I completely agree with everything said in this article. I subscribe to Dan Wieners newsletter and it gives great independent insight and advice about Vanguard. As a Flagship investor I get special service, but I appreciate this since I don’t have to wait forever to talk to someone about any action I want to take with my investments. John Bogle is my favorite person for getting the best investment advice on earth. Bogle heads rule!

  • Emily @ JohnJaneDoe August 18, 2016

    I have a Vanguard account (Roth and brokerage) and another account with an advisor (brokerage, Traditional IRA and inherited IRA). I like my advisor and think there are some things he points out that I might not otherwise think of, but once he retires I’ll be moving everything to Vanguard.

    • Matt Becker August 19, 2016

      That’s great! Good to hear you’re getting some solid advice and that you have a plan in place for once that goes away.

  • J. Money August 18, 2016

    Preach on!

    All my $$$ is at Vanguard too… made my life (and my finances) incredibly easier!

  • Amy August 22, 2016

    I’ve been dragging my feet on moving a couple of old employre retirement account over to Vanguard. (Opened an account, but haven’t completed the transfers.) Thanks for the reminder!

  • Kevin August 22, 2016

    I keep almost all my investments with Vanguard too. When my wife or I leave a company, and roll over the employer plan lickity split since I know Vanugard has lower fees. Love the simplicity of investments in one place. Sometimes I think I should have multiple places for the sake of diversity, but I don’t see Vanguard imploding in my life time.

    • Matt Becker August 22, 2016

      Andrew linked to a good article above on the subject of having all your money with a single company, and you can read more about that here and here.

      • Kevin August 26, 2016

        Thanks for pointing out Andrew’s link. I had seen Jim Collins article but not the Oblivious Investor one. Good stuff.

        • Kevin August 26, 2016

          Sorry, Andrew posted the Oblivious Investor link.

  • ESI August 22, 2016

    I’m a Vanguard guy too — have been for a couple decades.

    I can do my own investing and like low costs. They are second to none in providing great investments at rock bottom prices.

    Their site is a bit clunky but customer service is over the top.

    I will be with them forever!

  • Kurt August 22, 2016

    I agree 100% Matt, very tough to go wrong with Vanguard. Gotta love Bogle too, especially when he rips the active fund industry and preaches about the nest egg-destroying power of fees. 🙂

  • Sonya August 22, 2016

    Should I max out my 403b first, then start with Vanguard? Or…? Thanks!

  • Michelle August 22, 2016

    Absolutely love this! All of our investments are with Vanguard as well.

  • Jacq August 23, 2016

    Vanguard for me! From rolling my first 401k in, to the concierge service today to move other money into Vanguard – great customer service and support. Low fees, and I have realized I am a set it & let it grow investor, which is what Bogle advises. It’s a great match! If only dating could be this easy….

  • Mohan September 17, 2016

    I am very much a Boglehead and have been one for many years. One thing I have discovered is that if you have Vanguard funds in a 401k, the funds enjoy the institutional expense fee. These fees are even lower than the Admiral funds’ expense percentages. This has made it more difficult to consolidate under a Vanguard direct account. So in addition to my personal Vanguard account I have to manage a couple of additional 401k accounts.

    • Matt Becker September 26, 2016

      That’s a great point Mohan. There are certainly situations where you get access to lower fees in a 401(k) or other big retirement plan, and in those cases it can make a lot of sense to keep your money there.

  • Mohan November 7, 2017

    Fidelity, Schwab and other fund families appear to have suddenly found religion with respect to low costs and index funds. Perhaps its because Vanguard is attracting more money than its four (or more?) closest competitors combined.
    Are Vanguard’s competitors offering up their lower cost funds as loss leaders? How are they going to keep their share holders and private owners pleased without the bloated fees? And what is vanguard’s strategy to counter the undercutting of fees?

    • Matt Becker November 8, 2017

      Those are good questions Mohan, and unfortunately I can’t really answer them since I’m not on the inside of any of these companies. As an outsider though, and as someone who has spent a reasonable amount of time researching a variety of investment funds and companies, I do have a few opinions.

      First, while Vanguard will not always offer the cheapest fund in every single category, I have a lot of trust in them to continually work to keep costs as low as they can across the board. I believe that their culture is to keep costs low because it’s the right thing to do, and not simply because they need to do it in order to be competitive.

      Second, I believe that some of these other companies are lowering costs primarily because they have to and/or as loss leaders. For example, certain companies offer individual funds with rock bottom expense ratios, but their target date funds and other all-in-one funds have much higher expense ratios. It’s hard for me to come up with a good reason for why that would be, other than profit motive.

      This isn’t to say that Vanguard is always the right choices or that no one should ever invest with another company. There are certainly ways to pick and choose a variety of funds offered by a variety of different companies to minimize your fees as much as possible. It’s just that I trust Vanguard to largely do right by consumers in most cases, simply because they believe it’s the right thing to do.

      • Mohan November 8, 2017

        Matt, I agree with you 110%. I’m a Boglehead diehard and the Vanguard philosophy is right in line with my personal strategy.

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