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Vanguard anyone?

Posted by blue_fastback (My Page) on
Sat, Dec 16, 06 at 20:58

Just wondering if anyone is using Vanguard for your investments as far as mutual funds or IRA's and how you like them?


Follow-Up Postings:

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RE: Vanguard anyone?

They rule! Here's why:

1) I believe that they are the only mutual-fund company among the majors that is owned by its customers (i.e. its fundholders). In other words, it does not have separate stockholders to whom it is expected to return profits.

2) As a result, their expenses are among the lowest in the industry. This matters more than you may think: If you expect to get 8% return from a fund over the long haul, then if you can pay 0.25% in fees instead of 1%, you can keep nearly 10% more of your returns.

3) Vanguard pioneered the notion of index funds, which try to do as well as the market segment they represent rather than trying to beat it. The point is that if you try to beat it, you often wind up doing worse, but you can always match it simply by buying the same securities as the ones that define the index. Yes, you can always do better in principle--as long as you have a magic wand that will let you pick the right fund. But without such a magic wand, you will do worse most of the time than you would have done with an index fund.

4) They're straightforward to do business with. Once you have an account, you can do just about everything over the web, including transfers to and from your bank accounts. They're not big on frills, but frills cost money.

My biggest criticisms of Vanguard are that their international small-cap fund is closed to new investors, and they don't have any micro-cap funds. They do, however, let you own many other companies' funds through their own brokerage account, which makes it easy to keep track of everything in one place.

Here is a link that might be useful: Vanguard Funds Dominate Forbes


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RE: Vanguard anyone?

I have Vanguard; rolled over some 401(k)s from previous employers and they made it relatively easy, for a process that's just paperbound. I like the low expense ratio, there's tons of good information on their Web site (not all of it intended to sell Vanguard products and services), and the statements are easy to follow. I have no regrets about choosing them.


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RE: Vanguard anyone?

46 other reasons not buy Vanguard:
PRLAX
LETRX
UNWPX
The averge year to date return of the above, no investigating as to the operations of their companies, and we own them.


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RE: Vanguard anyone?

Maybe I need more coffee. 46 reasons but only three are listed? Three funds (even 46) that don't come up to the performance of broader indices? You could use that argument for any brokerage/mutual fund firm in existence. Some of them are far worse than Vanguard in that respect.


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RE: Vanguard anyone?

You are, of course, quite right that neither Vanguard nor any other fund company has specific coverage of every asset category in the world. How could it?

Now, about those specific funds:

PRLAX is a region-specific fund for Latin America. That's fine if you think that kind of specialization is for you. Indeed, if that's what you want, you can buy it through Vanguard's brokerage account. Its expense ratio is 1.13%, which is higher than any Vanguard fund I can think of, though probably typical of specialized internatioal funds; if it's worth it to you to invest specifically in Latin America, then it would seem to be a reasonable choice.

LETRX is a fund that invests specifically in Russia. Again, if you want to be that specialized, you might consider such funds. However, this one is a load fund: You pay 5.75% for the privilege of buying it. Moreover, you pay 2.13% per year in expenses. And yes it made 71% last year and 56% so far this year. On the other hand, it lost 83% in 1998, for the worst performance of any comparable fund. It also achieved a 100% bad ranking in 2004, and a 91% ranking in 2000. Indeed, every year for the past ten years, it has either been in the top 10% or the bottom 10% of all comparable funds. So its recent stellar performance comes at the cost of tremendous risk. This fund is not available through Vanguard.

UNWPX, on the other hand, is available through Vanguard. You don't pay a load for this one, and its expense ratio, 1.13%, is typical of such funds (world precious minerals). As it happens, Vanguard has a precious metals and mining fund also, but it is closed to new investors--which is a shame, because the Vanguard fund has substantially outperformed UNWPX over the past ten years (11.99% vs. 5.14% for the decade ending 3Q06). I note that the expense ratio for the Vanguard fund is 0.4%.

So what you seem to be saying that we should not deal with Vanguard because of three narrowly targeted funds. My response is that if you want those particular funds, two out of three are available through Vanguard, and the third one is a load fund with performance so volatile that I am tempted to call it Russian roulette :-) If you want that fund anyway, Vanguard won't sell it to you.

Nevertheless, Vanguard does what it does extremely well, and its costs are among the lowest in the industry. If you are willing to give up the hope of outperforming the market in exchange for confidence in not underperforming it, my experience has been that Vanguard's funds, particularly their index funds, do a fine job.


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RE: Vanguard anyone?

Vanguard does have some fine funds indeed, and granted I have been following the leaderboards for a couple of years now. 46% is the return I have averaged so far this year, a little better as the distributions from US Global wash through.


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RE: Vanguard anyone?

Bushleague,

May I ask what funds you have that are getting 46% return?

These numbers are outstanding.


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RE: Vanguard anyone?

They're probably more lucky than outstanding.

For example, Bellsouth (BLS) made 69% in the past year, which shows that you don't have to look very far for such returns as long as you're lucky. Of course, the year before last, it made approximately 0%. Which shows that luck does count.

It's easy to make huge returns if you can guess the next hot sector, but I don't believe that anyone can do that consistently.


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RE: Vanguard anyone?

Quite a few investors are more likely to refer to their winners than their losers.

But - more than likely their winners are closer to the top of their minds than the losers.

But, often, it's the losers that teach us the most.

If we are willing to listen/learn.

ole joyful

P.S. If you show me someone who always wins ...

... I was tempted to say that I'd show you a liar.

But let's just say that I'd ask you to ask yourself whether that person might be, if not a liar, someone who might be painting less than a complete picture.

I hope that you have a memorable New Year - for positive things, that is.

ole joyful


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RE: Vanguard anyone?

Sure and ATT (T) is just completing the deal with Bellsouth.

Seriously for someone new to investing I would recommend investing in the indexes. 2006 ended with Dow up 16%, the Nasdaq up 10%, and the S&P up 14%. This method of investing and the power of compounding are the basis for a popular book on investing called "The Armchaire Millionaire". There are other publications available such as "Wealth Without Risk", and my favorite "What worked last year probably Won't Work This Year", which I am in the process of writing.

Hands on the table and all funds, etf's, and stocks from Traditional IRA, Roth IRA, Sep IRA, Roth 401, and Individual accounts shows a 2006 return of 46.6% using the tools at TD Ameritrade.
Losers, sure everyone has them. Try picking the property management firms (AVB), heavily advertised companies (NTRI),
military (FRPT) jeez we made a bundle on these stocks in '06. It takes a a little research, calling some people, even visiting with them. Sometimes it helps to own and use their products, their voip (CLEC), and (PEP) well eat of course.

Have a great new years!


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RE: Vanguard anyone?

Hmmm... First you say that what worked last year probably won't work this year, then you recommend half a dozen stocks on the basis that they performed well last year.

Seems like a good basis for an experiment. I'll be back on July 1 with a report on how these six stocks did compared with index funds. It should be interesting.

(I do not expect that the indices will perform these individual stocks over six months. What I do expect is that the indices will outperform them over a period of several years, and you won't know when to get out of them except in retrospect. But we'll see)


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RE: Vanguard anyone?

Vanguard, yes!

They're ridiculously easy to deal w/ as far as IRA rollovers go. just fill out the form online, print it, sign it, and mail. They handle everything else. Unfortunatley, it's less easy w/ regular mutual funds--you have to cash in the fund and send a check to them.

Their fees are as low as you can go in a mutual fund, and they've kept their noses clean in the midst of all the cheating that's come to light in the last year or so.

I haven't tried buying stocks and other companies' funds from them, but it's nice that you have the option.


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RE: Vanguard anyone?

alphacat I count five but that's okay. We know well before hand when to get into, and out of most stocks. The Global economy is constantly changing which is the basis for my hypothesis, what worked last year probably won't work this year in its present form. Look at the turnover and the Beta in the MF's (does anyone else do this?) Read everything that you can get your hands on. 50 years ago Ford Motor Company was the balls, last year we bought 10,000 shares of TM based up their future plans. The diesels are coming, oh my!
Have a great one!


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RE: Vanguard anyone?

On January 1 I said that I would check back on the performance of the five stocks that bushleage recommended. Here's what they did since January 1:

AVB: Down 6.5%
NTRI: Up 8.3%
FRPT: Up 17.5%
CLEC: I can't find them
PEP: Up 3.1%

So if I had bought the four of these stocks that I can locate in equal proportions, I would have gained about 8.5% for the year so far.

If instead, I had simply bought VHGEX, Vanguard's Global Equity Fund, I would have made 13.1%, with much lower volatility.

If you object that I'm comparing domestic with international, I will note that Vanguard has 17 mutual funds that they categorize as "Domestic--More aggressive." It seems fair to compare those with owning individual stocks. Of those 17 funds, 13 of them beat that 8.5% benchmark for the year so far.


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RE: Vanguard anyone?

Thanks for the follow-up, alphacat. It's nice to have some evidence that individual stocks are not always the way to go.


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RE: Vanguard anyone?

Vanguard's a good company.

So is T. Rowe Price.

One of the most consistent and underrated is American Funds, but you won't get them at NAV unless you have a fee-based relationship with an advisory firm. Ditto for Allianz PIMCO - although sometimes these funds will be offered through big company 401k selections.


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RE: Vanguard anyone?

I did buy several mutual funds from Vangaurd and am very pleased with them.


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RE: Vanguard anyone?

The more I read the more confused I get

Investing seems to go in cycles. Right now we are in a Buy the Whole market and you should do ok cycle. Just buy the Vanguard index. Maybe with a few diversified traditional dividend earning stocks thrown in (think coke, a drug company or heavy industry stock, not making a recommendation here, have no idea where coke is trading and do not care, I do not own it, might buy it, might not). Preferably if it is a value stock even better

10 years ago we were in the just pick anything in technology stock and you will make a killing. The truth is if you did that and either picked the right one or got out in time (luck not skill), you did do ok. At that time NO ONE wanted traditional stocks, whether they paid a dividend or not. They did not have the future potential of an Advanced Microsystems! Who knew?

It seems that as investment philosophies change those areas get hot for a while, then they get really downtrodden. Does it have anything to do with intrinsic value? Who knows!

I read an interview with Jack Bogle who invented Vanguard. I was impressed. However, I have held a Vanguard 500 fund in one of my IRAs for 12 years, it has done ok but just ok


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RE: Vanguard anyone?

You say "I have held a Vanguard 500 fund in one of my IRAs for 12 years, it has done ok but just ok"

That is because the Vanguard 500 fund is specifically intended to capture the returns of the S&P 500, which represents the domestic large-cap asset category. That category has done ok but just ok over the last 10 years--more specifically, it has underperformed most other asset categories in that period.

Specifically, in the 10 years ending June 30, 2007, the Vanguard S&P 500 fund has returned an average of 7.05% per year.

If instead you had bought the Vanguard Total Stock Market Index, which includes all stocks and not just large-cap, you would have done slightly better: 7.6% per year over the last ten years.

Yet another alternative is the STAR fund, which is a globally diversified fund that includes both stocks and bonds. That fund returned 8.69% per year over the past ten.

Finally, if your crystal ball was in perfect working order ten years ago, you could have bought their Energy Fund and made a tidy 17.83% per year over the past ten years.

Of course, you really do need a crystal ball to predict what is going to happen to various asset categories in the future. Trying to predict it from looking at the past is like driving while looking only in your rear-view mirror.

This is not a property of Vanguard -- it is a property of the markets in general.


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RE: Vanguard anyone?

Of Course you are right AlphaCat. This is based on the index not Vanguard. Still Index investing is supposed to be so great. I am currently getting 6.4% at the Bank!

I am surprised at the total return of the market as a whole. However if you look at it from 1992 it is over 11%


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RE: Vanguard anyone?

6.4% at the bank is a nice return! From that perspective, 7.05% a year out of the market is no great deal. However, a couple of years ago, 6.4% was not an option at the bank. 7.05% looked good then. And banks have not offered anything close to 11% a year over the last 15 years.

Investing crazes come and go. One of the few time-honored truths in investing is that Diversification Is Good. Index funds diversify (within their stated scope). Bonuses are they have lower expenses and that stocks generally have offered a positive return over many years. They're a no-fuss, no-muss investment. Certainly, people willing to do a lot of research and watch the market closely can make more of a profit in sector funds or individual issues, but most of us working folk find it hard to find time for all that.


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RE: Vanguard anyone?

What kind of bank offers 6.4%? On what kind of account?


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RE: Vanguard anyone?

Bank of America has a couple of affiliated money market account programs. One is through the NEA, the other is through AAA, although I think the NEA gives you a higher rate. I did have all sorts of problems with them crediting the interest, finally had to send them a letter. I think 6.4 is a mistake should have been 6.2 and is only for the first 60 days, then it drops to 5.2 there are minimum balances


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