The Vanguard Group is an American investment management company based in Malvern, Pennsylvania, that manages approximately $3.6 trillion in assets. It is the largest provider of mutual funds and now the second-largest provider of exchange-traded funds (ETFs) in the world after BlackRock, with about $451 billion in ETF assets under management, as of March 2015. It offers mutual funds and other financial products and services to retail and institutional investors in the United States and abroad. Founder and former chairman John C. Bogle is credited with the creation of the first index fund available to individual investors, the popularization of index funds generally, and driving costs down across the mutual fund industry.
Vanguard is owned by the funds themselves and, as a result, is owned by the investors in the funds.
The index fund philosophy
For his undergraduate thesis at Princeton, John C. Bogle conducted a study in which he found that around three-quarters of mutual funds did not earn any more money than if they invested in the largest 500 companies simultaneously, using the S&P 500 stock market index as a benchmark. In other words, three out of four of the managers could not pick better specific "winners" than someone passively holding a basket of the 500 largest public U.S companies. The managers could pick specific stocks which would do as well as picking the 500 largest stocks (essentially doing as well as random chance would dictate), but the cost to pay their expenses, as well as the high taxes incurred through active trading, resulted in underperforming the index.
John Bogle, the chairman of Wellington Management Company, was fired for an "extremely unwise" merger that he approved, a poor decision that he considers his biggest mistake, stating, "The great thing about that mistake, which was shameful and inexcusable and a reflection of immaturity and confidence beyond what the facts justified, was that I learned a lot." Though no longer the chairman, he remained with the company, and arranged to start a new fund division at Wellington. He decided to call it Vanguard, named after Horatio Nelson's flagship at the Battle of the Nile, the HMS Vanguard. Bogle chose this name after a dealer in antique prints left him a book about Great Britain’s naval achievements. The book mentioned Nelson’s flagship, leading Bogle to think, with regard to Vanguard, “What a great name.” Bogle also recounts that Wellington executives resisted the name, but narrowly approved it after Bogle mentioned that Vanguard funds would be listed in the alphabetical listings in the Wall Street Journal next to Wellington funds.
The Wellington executives, still smarting over the bad merger, required that the fund not be allowed to engage in advisory or fund management services. Given that this effectively disallowed it to start a new actively managed fund, Bogle saw it as an opportunity to start a passive fund, tied to the S&P 500. Bogle has since said that he was inspired by, not just the academic research showing the potential for a passively managed index fund to outperform an actively managed fund, but also by Paul Samuelson, an economist who later won the Nobel Prize for Economics. In a Newsweek column, Samuelson had cited this academic researching in imploring that someone start a passive index fund tied to the S&P 500. The mutual fund industry, having grown used to high-fee funds marketed as being able to beat the market, resisted Vanguard's low cost index approach. Some labeled it Bogle's folly, and some claimed it was un-American to simply try to be the market, rather than to try to beat it.
After the Wellington board had (reluctantly) agreed to accept Bogle's offer to start the first index fund offered to the general public, Bogle established the fund. Initially called the First Index Trust in 1976 (later changed to Vanguard 500 Index Fund), it raised $11 million in its initial public offering. The banks that managed the public offering had been hoping to raise $150 million, and after the disappointing results, suggested that Bogle cancel the fund. Bogle refused, relishing the fact that he had just established the world's first index mutual fund. Vanguard at this time consisted of three employees: Bogle and two analysts. Growth in the first years was slow, a situation not helped by the fact that the fund did not pay commissions to brokers who sold it (which was unusual at the time). Within a year the fund had only grown to $17 million, but one of the Wellington Funds that Vanguard was administering had to be merged in with another fund, and Bogle convinced Wellington to merge it in with the Index fund. This brought it up to almost $100 million.
Growth in the fund accelerated after the beginning of the bull market in 1982, and other mutual fund companies began to copy the indexing model. These early attempts were not successful since they typically charged high fees, which defeated the purpose of low cost indexing. In 1986, Vanguard began its second mutual fund, a bond index fund. This was the first bond index fund ever offered to individual investors. One earlier criticism of the First Index fund was that it was only an index of the S&P 500. In 1987, Vanguard considered starting a new fund, this one modeled on the entire stock market. Deciding this was not feasible, later that year Vanguard began its third fund, an "extended market fund" (an index fund of the entire stock market, minus the S&P 500). Over the next five years, other funds were begun, including a small cap index fund, an international stock index fund, and a total stock market index fund. As the 1990s stock market boom got underway, more funds were offered, and several (including the S&P 500 index fund and the total stock market fund) became among the largest funds in the world, and Vanguard the largest mutual fund company in the world.
Vanguard's success caused other mutual fund companies, which had resisted Vanguard's low cost indexing model, to begin making a serious effort to offer their own low-cost index funds. Bogle retired from Vanguard as chairman in 1999 and was succeeded by John J. ("Jack") Brennan. On August 31, 2008, F. William McNabb III succeeded Brennan as Vanguard's CEO, having served as the organization's president since March of that year. Both successors expanded Vanguard's offerings beyond the index mutual funds that Bogle preferred, in particular into ETFs (where Vanguard is currently the second largest provider despite its late start) and actively managed funds. Vanguard also provides brokerage services, variable and fixed annuities, educational account services, financial planning, asset management, and trust services. In recent years, more than 100% of the cash flow into mutual funds has gone into index funds (mainly to Vanguard), and currently 25% of all mutual fund assets are in index funds. The trend towards index funds, growing since Vanguard's initial index offering, has subsequently accelerated since the 2009 market crash. Currently, the two largest mutual funds in the world (the Total Stock Market Fund and the 500 Index Fund) are Vanguard's, while several others (such as the Total Bond Market Fund and Total International Market Fund) are among the ten largest.
Vanguard contracts the management of its actively managed funds to various investment firms and sets a portion of the management expenses paid by shareholders based on the fund's performance. Wellington Management Company manages two of Vanguard's biggest funds, the Wellington Fund and Wellesley Income Fund. The Wellington Fund is one of Vanguard's oldest funds, formed on July 1, 1929. Noted value investor John Neff managed the Windsor Fund from 1964 to 1995, which returned 13.7% annually versus 10.6% for the S&P 500. Vanguard's corporate headquarters are located at Malvern, Pennsylvania, a suburb of Philadelphia. It has satellite offices in Charlotte, North Carolina and Scottsdale, Arizona. The company also has offices in Australia, Asia, and Europe.
|Trading Platforms||Vanguard's website, Mobile Trading|
|Phone||877-662-7447, 800-523-1188, 800-523-1036, 888-888-7064, 800-997-2798|
|Address||Malvern, Pennsylvania, United States|
They have terrible customer service. I have been hung up on, lied to, and subjected to very condescending remarks. I have had problems with them in the past but this recent issue trumps them all. I am even more motivated to find another job just to be rid of them. They don't even know their own formulas and policies as a result they are costing me more money waiting for them to provide information on my loan availability. I am so frustrated at this point I would prefer using a loan shark at least I know what's involved ( you either pay the loan back or we break your legs). Its beyond painful when you are requesting a loan on your own money in which you yourself should have a right to. Does anyone know who actually monitors the actions of these companies? Is there an official governmental agency or non affiliate group that will investigate my issue? I don't understand how they stay in business, I have seen many negative posts about them. Beware! All that glitters is not gold, in fact your gold may never be seen again. I don't know how the people that work for them sleep at night. I wouldn't be able to knowing that the company I work for is not customer service oriented and lacks integrity. I really feel sorry for anyone who has to deal with them, and they give them the run around as they are doing to me. In this economy its difficult enough to save anything and then you have these people who work against your own personal financial goals. Its horrible and I want out! Run for your life!
my aunt recently tried to change her benefits for when she dies a family member can receive it. It happens her husband was married to another women so my aunt annulled the marriage. Vanguard would not allow her to change the benefactor and said she could only do it one time in the beginning. I explained about her marriage and additional it doesn't make sense what she worked for and invested she cant give it to some one else. They gave her a run around for 120.48 which at death her benefactor will get 60.00 . Im glad this happen because im not going to fall for this company and I made sure I pass the word thru my family member to change any investment or insurance to another company. Too bad I thought Vanguard was a trusted company to do business with , I guess I was wrong.
Brokerage website is down at the worst of times (e.g.: for twenty minutes before the markets close.) Company is not willing to give any concessions or rebates to keep active traders from closing accounts.
My mother died in 2009. They have refused to disburse her estate - citing all sorts of excuses. We have sent birth and death certificates. Notorized copies of the will. Notorized letters from the executor and my sisters. Letters from my mothers attorney. There's always something preventing them from disbursing the funds.
Please - do not do business with this company. You get a better and more timely response from a Nigerian King wanting to discuss a long-lost relative.
I've been with Vanguard 20-years. I've experienced good customer service. I hail from the northeast so I'm fine with direct speaking CS people.
My question is in regards to the "transition" that Vanguard is pushing where you move from two accounts (in my case an IRA and an IRA/Brokerage account) to just a simplified "full brokerage IRA" where everything is held in just the brokerage account.
Their literature touts all the positives but I cannot determine if this is the best move (for me).
I know it'd make their computing and other services more streamlined, and it makes sense (to a degree), but I feel a bit cautious about this move. Does anyone else have a good/bad experience with the transition from two accounts to just one (the brokerage account)?
The Vanguard "Transition Team" (inherited IRA) is the most indifferent and incompetent bag of cats I have ever dealt with in my 25 years of private investing. You would think they would want a new six-figure account.
Stunningly incompetent customer service, and no way to escalate the problems, even to a basic level of management. The threat of legal action is the only recourse.
I'm 22 years old right now will be 23 in a few months. I currently make about 30k a year after taxes. I'm single. I am in the field of IT and plan to be making much more money in the near future. I'm starting to think about opening an account because I really hope to be able to maintain myself in my old days and leave something for my kids (if I ever have any). Any advice from investors?
I'm considering moving my on-line brokerage account to Vanguard after being a fund investor with them for many years, and the comments here reflect what I would expect from Vanguard.
The more money you have to invest, the less frequently you trade, the more you focus on index ETFs, the more self-directed you happen to be, and the more you rely on a variety of other research resources, the better Vanguard adds up. Their fees are very competitive for infrequent traders, i.e., long view investors. Clearly, this is not the place for active traders and Vanguard makes no pretense to being such. The low-cost approach should indicate this is not the place for hand-holding.
I don't see any comments here on trade execution, but it would not surprise me if there are brokers out there who can get you a couple extra pennies per share on a trade, but if your holding period is long the difference is insignificant. On the other hand, given Vanguard's financial heft and conservative culture, you won't find yourself entangled in an MF Global or like fiasco.
When buying shoes you don't expect one size to fit all. Why expect that from a brokerage?
It's interesting to read through all these comments. I've been researching the best options to rollover my 401(k) from a former employer; and have been reading up on Vanguard's reputation given that my current employer uses them.
My 2 cents re. their customer service: I had some issues logging in to my.vanguardplan.com and called their customer service line. The CS rep (Tony) was super helpful and did not have any of the traits that other posters claim (perhaps he's not from the northeast - jk:).
Although he couldn't fix the problem on the phone, he called me back within 30 minutes to confirm that it was being looked into and sent me the information that I had requested via email within the hour.
Perhaps I experienced this good customer service b/c I told him I was considering rolling over my former 401(k) to Vanguard; regardless the guy was professional and prompt.
Hope this helps.
I can only speak of my experience with Vanguard and would not want to comment on other posts. I have been a Vanguard client for about 10 years, having come over from Merrill Lynch. Wish I had done it 20 or 30 years ago. I am much more of a buy and hold investor so for day traders or very frequent traders this review will not address your situation. I have accounts for myself and my wife, sub accounts for our IRA's and sub accounts for my kids college investments.
Over the years I have had to call Vanguard numerous times for assistance and have had a professional, informative experience every single time. I have never, not once experienced rude, unprofessional behavior but rather received answers to the questions I had. I do notice that some transactions require a bit more hoop jumping as far as paperwork but in this day and age of identity theft I am fine with that.
I see Vanguard as a trade-off. I received more "personal service" from Merrill, periodic phone calls,etc., but I also paid a hefty price in commissions and fees that I do not pay at Vanguard. I kept getting sold ML mutual funds that made them money but did nothing for me. I realized that I could do just as good or better myself so I read everything I could on investing for about 6 months, put together a plan and executed it with Vanguard and am 100% satisfied with that decision.
Our nest egg has grown considerably and I am positive that it would not have with Merrill or any other high cost, high fee investment house. You just have to know going in that you will have more control and ultimately more responsibility for your investments.
I wanted to transfer $1.5mm from fidelity and found the front office people very inept and ill informed. They were reluctant in providing the management agreement for my review unless I committed to signing up. I wanted a sample copy of the client's annual report and was provided sample schedules in miniature where they could not be read unless a strong magnifier was used. When I asked for a regular size copy of the report, it took several calls to three people before they responded no regular size model reports are available. I took a look at their customer reviews on line and am grateful to find out early their customer service is horrible, they are arrogant,have a take it leave attitude and are generally incompetent. Beware, they appear interested in themselves first and not at all responsive to the client needs.
I have been a VG customer for 10+ years. I first rolled over my wifes 401k and just recently moved my retirement acct into VG after retiring. I have done most of my contact over the years on-line but the 3-4 times I have had to call the CS folks they were helpful and polite. The most recent (a week or 2 ago) was when I didn't understand their accounting method in my brokerage acct. and called and spoke to a young lady. She said she understood my question but didn't have an immediate answer. After asking to put me on hold she came back in a minute and fully explained the process - so to date I have had great dealings with VG and their CS folks. If I had a complaint, it would be when you make a trade and buy a stock it takes all day for your money to be posted so if you're looking to make a quick turnaround profit, you'll have to wait for the next day. Maybe that's good, gives me a little reflection time :). So for a 2 dollar trade and access to some of the best low cost Mutuals on the market I'm sticking w/ VG!
Vanguard is terrible, Incompetent service representatives who are not familiar with their own policies so you get constant calls for verification., had to go through ridiculous loopholes to withdraw. Closed my account.
Been investing with Vanguard for many years. If you have total assets with them over $500,000.00 stock commissions are only $2 a trade. That's hard to beat. I still pay a $25 annual fee for an Annuity I have with them but that doesn't concern me considering the excellent service I have received all these years
PROS: You can manage your investments in Vanguard products as well as other stocks and mutual funds from within your Vanguard account.
CONS: Even though the trade prices are good at $7 for accounts worth less than $50,000, there are discount brokers with better prices.
Been trying to get a brokerage account set up for 5 months. They keep sending me the wrong forms to sign and never follow up once they've received the mail from me. And it takes all day to call them and ask "Hey, did you get my mail? Can I for the love of god finally open this account?"
Vanguard has horrible customer service.
Reason 1: For customers in the Pacific time zone, their customer service closes down at 6PM. For a company as large and rich as Vanguard, you'd think they could hire telesales operators to stay until midnight, like all the other financial services firms.
Reason 2: No email interaction. From their web page, there is not email address to communicate for customer support.
Vanguard must be a very old school company in a 21st century world. If they are this bad about customer service, how bad must they be at managing my money.
Time to find a new 401K fund.
I own 5000 shares of a Vanguard subsidiary that just claimed Chapter 11 instead of selling off property to pay debt, This cost me 20% of my life savings while the compaany's managers will get paid out. Vanguard is just as dirty as the rest. Not a trusted company name. You're better off putting your money in a savings account.