Stock Market Report - Vanguard

Todd Becker

If you are anything like me, you have probably never heard of a brokerage firm called Vanguard. Thatıs probably because Vanguard does little to no advertising. In the year 2003, Vanguard is expected to take the place of Fidelity as the largest fund purveyor in the world.
Vanguard has $442 billion under itıs management while Fidelity has nearly $700 billion under management. Vanguard brings in $200 million a day in new money. You may ask what the reason is that itıs 12 million customers are pouring their money in this company. The very simple reason is that Vanguard is a 100% no load fund. They promise to put the maximum amount possible to work for them with the smallest possible amount taken out for overhead. In other words, Vanguard sells the ideas that fees and costs are evil. They sell virtue which is not something you can say for any of the other money managers such as Peter Lynch. The average mutual fund in the United states runs an expense ratio of 1.24% and the ratio for Vanguard funds are 0.28%. That is almost a full point lower which is why it saves itıs clients $4 billion a year. Vanguardıs very prestigious $75 billion 500 index fund, beat 86% of all stock funds last year and had a higher percentage than all stocks over the past decade. In addition to all of these facts, Vanguard has $77 billion in fixed income funds and are in the Forbes rankings of the best buys. As long as the bull market stays, Vanguardıs assets will continue to go up. They have already gone up 30% in ten years. But, where did all of this start from?
The founder and creator of Vanguard is John C. Bogle. In 1974, at the age of 21, he came up with the idea of creating a fund that would be bought, not sold-without a sales commission. His idea was simple - ³Why not try to maximize growth by keeping the overhead down? ³ At the time, Bogle was working for the Wellington Management. When he presented his ideas, he was fired and it was then when Vanguard was born. It was in Wellingtonıs back office when Bogle created Vanguard as a fund distributor company owned by shareholders. For years you can say that the fund was a failure. In 1977, Bogle decided he needed to make some changes in the company and he made Vanguard a NO LOAD fund which in that time, and even in todayıs world is very uncommon. Even after going to a no load fund it was still underperforming in a so called Bear market. At this point,there was nothing else that Bogle could do. All he did was keep faith and believe in himself that things would work out for the better. It was a good thing that he did because, today it is expected to become the leading brokerage in the entire world. Bogle also wrote two books entitled Bogle on Mutual Funds and Common Sense on Mutual Funds. Both of these books talk about money managers and how their main focus must be on the human being and human principals.
In conclusion, if you buy in Vanguard you know that you are buying in frugality. Vanguard like many business in the 90ıs have gone to the internet. Last December, Vanguard started an online trading service with access to 1,200 competing funds. The stock of the company will not be effected by any of this because the stock is not on the public market and probably never will be. Vanguard is customer friendly, successful, morally sound and is the worldıs up and coming leader in brokerage firms.



Title of Periodical: Forbes, February 8, 1999

Title of Article: The Gospel According to Vanguard

Pages: 114 - 120