Yesterday I asked readers Do You Know this about Vanguard Wellington and Wellesley Funds? I explained that we have not soured on the funds, but that their effective maturities are longer than we'd like. I also wrote that at Young Research we recommend laddering bonds. One of the reasons we favor laddering bonds is to help strip-out interest rate risk. When you own a bond outright you have control over your holding period. Duration measures a bond’s sensitivity to interest rates. For example, a bond with a 15-year duration will decline by 15 percent with every one percent increase in … [Read more...]
Why Vanguard Is Too Big For You
If you want clear evidence of why Vanguard is too big, then look no further than the money flow into passive index funds. When investors are lulled to sleep by a bull market, they dream about things like early retirement, vacations, and second homes. What they tend to miss is that reversion to the mean is a fact of life. You can take my word for it and that of the father of index funds Jack Bogle.
Learn more about why Vanguard is too big for you below:
Do You Know this about Vanguard Wellington and Wellesley Funds?
As you know our concerns about Vanguard continue to mount. Yesterday, a reader wrote: “[Dick] used to be big on Wellington and Wellesley, given their longevity and resistance to tail risk over time. Also, it seemed to me that Wellington Management's fixed income expertise would be an asset in this part of the cycle. I'm wondering why he has soured on these funds.” The quick answer is no we have not soured on Wellington and Wellesley with two distinctions. First, Vanguard has nothing to do with the management of Wellington and Wellesley. Vanguard has outsourced those management … [Read more...]
My Concerns as Money Piles Up at Vanguard
Last week Vanguard founder Jack Bogle spoke out about the dangers of index funds, something he helped pioneer. Take a look back at this piece I posted on October 12, 2017 for more depth on the issue. Let the good times roll? Great lyrics from the Cars but it’s a song I can’t get out of my head thinking about the money piling up by the truckload at Vanguard’s back door. We’re talking nearly $300 billion in the first nine months of this year alone. All of that money unloaded and stacked up with the rest of the $4.7 trillion at the firm. That’s a lot of confidence in one company. And maybe … [Read more...]
Vanguard Founder Jack Bogle Sounds the Alarm on Index Funds
You pay attention when the founder of the Vanguard Group, Jack Bogle speaks. As the father of the index fund it would be hard not to include Mr. Bogle’s bust on the Mount Rushmore of financial legends. Therefore, when Bogle speaks, I listen. As do thousands of his groupies known as "Bogleheads." “There no longer can be any doubt that the creation of the first index mutual fund was the most successful innovation—especially for investors—in modern financial history,” writes Bogle here, “The question we need to ask ourselves now is: What happens if it becomes too successful for its own … [Read more...]
Yes, Vanguard is too Big: Part II
Has there ever been a bigger supporter of Vanguard than Dick Young whom, unlike other promoters and hucksters out there today, never had a horse in the race? And could there be a better triple play combo than Wellington Management, Vanguard, and Dick Young’s approval? Vanguard’s low-cost expense ratios, no 12b-1 fees, and its history with Wellington Management were, among other valuable investor tenets, enough to recommend Vanguard to you. Buying Vanguard Wellington and Wellesley was simple. Owning them gave you a balanced portfolio with a stock to bond mix of 60/40 or 40/60. There … [Read more...]
Yes, Vanguard is too Big
A gorgeous, sunny, good morning to you from Newport, RI. Isn’t it amazing what a little sun can do to one’s psyche? Last week I told you how my SEP-IRA contribution was incorrectly deposited to my traditional IRA by Vanguard. Lucky for me, I caught their mistake early and avoided a potential paperwork hassle come tax-time next year. I chalked the error up to the fact that Vanguard is in the transaction business and mistakes happen. But in thinking about the issue further, I probably caught their mistake because I do this for a living. Which makes me wonder: is the average investor paying … [Read more...]
Is Vanguard too Big?
Personally, I have had only one minor administrative error recently with Vanguard where they incorrectly deposited SEP-IRA money into my traditional IRA. I called them to explain their error, they pulled up the letter of instruction, recognized their mistake and made the correction. Problem solved. With record inflows of more than $1 billion per day in 2017, or $369.3 billion, some investors are wondering if Vanguard’s success is a problem. I don’t think that’s the case. In a transaction oriented business there are always going to be mistakes. They can be corrected. When I worked at … [Read more...]
Could this Be the Vanguard GNMA Winning Edge?
Update: 7.1.2020: From Wellington: "Effective at the close of business on June 30, 2020, Michael F. Garrett has retired from Wellington Management Company LLP and no longer serves as a portfolio manager for Vanguard GNMA Fund. Brian Conroy and Joseph F. Marvan remain as the portfolio managers of the Fund." Originally posted June 7, 2017. Do you know Michael F. Garrett? There’s no reason that you should, but to me, the Senior Managing Director at Wellington Management Company LLP in Boston, Massachusetts might be one of the most important names in the fixed-income world today. He’s the … [Read more...]
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