Why You Should Consider Investing with Vanguard

I am a big, big, big fan of Vanguard. I have the majority of my investments with them (they're great at index funds -- they keep the costs very low) and have been dealing with them for years now. They've never let me down and have great customer service. In addition, I agree with their investment philosophy. I recommend them 100%! (BTW, no, I am not receiving any sort of fee from them for this glowing endorsement. I wish I was -- I'd love to get paid for promoting a company I like so much. But for now I'm just giving them good press because they deserve it, no other reason.)

One of the great things about Vanguard is their low fees. This is an important factor when deciding on an investment because investing costs (and taxes too!) can impact your total return dramatically. After all, which would you rather have: an investment that returns 12% but costs 1.5% in expenses or one that returns 11% but costs 0.3% in fees?

Or better yet (and more likely), which would you rather have: an investment that returns 12% but costs 1.5% in expenses or one that returns 12% but costs 0.3% in fees? See what I mean? Expenses (fees) can have a big impact on the amount your investment earns in the end.

This piece from Smart Money highlights how Vanguard offers low fees on their investments (mutual funds). Here are some key thoughts from the article:

Each week, when we write the recipe for our fund screen, we include an expense ratio ingredient to remove those funds that charge more than they should. That filter almost never catches Vanguard funds.

Of the 197 Vanguard funds in our database, none have expense ratios above the median in their respective classifications. A mere two stray from the bottom quarter and only a dozen rank outside the lowest 10%.

And so, when you ask what makes Vanguard Vanguard, the answer is likely fees.

"It's absolutely low fees," says Jeff Tjornehoj, a Lipper senior research analyst. "That's their bread and butter."

"That's their strength. Quite often, that's what sets them apart from the competition," echoes Sonya Morris, a Morningstar analyst who just finished a one-year turn as editor of the firm's Vanguard Fund Family Report.

The average expense ratio for Vanguard equity funds (excluding ETFs) is 0.245%, more than a percentage point better than the average equity fund. On the fixed income side, the gap is similarly yawning: Vanguard checks in at 0.142%, compared with 0.967% for the field.

Those low fees give Vanguard an edge when it comes to returns. And it shows. The firm's equity funds have returned 14.48% annualized over the last three years, besting the average equity fund (12.43%) as well those of its two closest rivals, American Funds (14.02%) and Fidelity (13.87%).

Oh, yeah, that's my Vanguard. Low fees, great total returns. If you're in the market for some low-priced, great returning funds, I suggest you check out Vanguard. Based on my 10 years or so with them, I highly recommend the company (in case you haven't figured that out by now). :-)

Comments

[Lynn]

Don't use Vanguard as your brokerage account. They have one of the highest transaction fees in the industry.

[Lynn]

Don't use Vanguard as your brokerage account. They have one of the highest transaction fees in the industry.