Vanguard Funds: Low-Cost Investments

A Look at Vanguard Group, the Company Behind the Vanguard Funds

By: Robert F. Abbott, freelance writer and author of Big Macs & Our Pensions

The Vanguard funds company is among the top three in the United States (and operates subsidiaries in other countries, as well).

While best known for its low-priced index funds, the company also has created and manages active funds (index funds are generally passive) and ETFs. It also manages funds for institutional investors (such as big pension plans and smaller mutual fund companies).

From a consumer’s perspective, Vanguard brings something different to the table. You’ll find those differences outlined well in the first two minutes of this YouTube video from MoneyHop (stop the video at the two-minute mark unless you want to learn about funds from Merrill Lynch):


As you heard on the video, one of the reasons Vanguard can offer low fees (officially called Management Expense Ratios, or MERs) is because it does little advertising.

One of the other big, or perhaps biggest, reason involves the ownership structure of the group. That structure makes it something like a credit union. The funds own the company, and clients own the funds. So, as they say at Vanguard, the firm does not have to make profits for the shareholders (since shareholders do not exist for this company). A bit complex, and interesting, but really of little consequence for most fund investors.

Keeping costs low has become a mantra for the people who run Vanguard, and that has generally worked out well for people who have invested in Vanguard mutual funds.

Note that I wrote, generally, in the preceding paragraph. Costs—and returns—constitute just one element of successful investing. As I wrote in Top Mutual Funds: As Defined by You, several issues need attention as you go through the process of finding and buying them.

Nevertheless, Vanguard funds do deserve attention if they come up on your short list. The company has delivered good returns on many of its funds over the past 40 years and if nothing else, will keep your investing costs down in the future.

The Writer

Robert F. Abbotttop mutual funds is a freelance writer; see his profiles and analyses of value stocks at GuruFocus.com . He is also the author of Big Macs & Our Pensions: Who Gets McDonald’s Profits?

In this book, you will:

  • Discover the Ownership Revolution, and what it means to your retirement funding.
  • Find out how much of your lunch bill is a profit for McDonald’s, and who gets the profits.
  • Learn how corporate profits fuel one of the greatest social programs ever developed.

Click here to read a free preview at Amazon.com