The world is Internet-savvy. Millions of people have learned that actively managed mutual funds pad Wall Street’s pockets. Low-cost index funds, by comparison, give more to investors.
The public doesn’t need an Occupy Wall Street protest. Instead, they can vote with their wallets. Many run to Vanguard. It’s the world’s biggest provider of index funds. It’s also now bigger than any actively managed mutual fund company in the world.
Vanguard has a hippie-like backstory. John Bogle started the company in 1974. He set it up like a nonprofit firm. If you buy its index funds, you’re an owner of the firm. No private investors own a piece of the company pie. Unlike most banks (and many mutual fund companies), no public shares trade on the stock market.
Instead, Vanguard was created for the people. It was capitalism born in a commune. Until recently, however, most people had to go solo if they wanted a portfolio of index funds. They waded through Vanguard’s offerings of index funds without any guidance. Or they built their own portfolios with ETFs (hip little cousins of the traditional index fund).
These two options are still the cheapest way to go. They take less than an hour a year. You never have to follow stock market news or forecasts. Your results would also dust those of most professional investors.
But for some investors, that feels like running naked. Many prefer the clothing and the guidance of a financial advisory firm. Your grandparents ...