Vanguard recently wrapped up a cross-country tour that they dubbed “The At-Cost Café” to extol the virtues of low-cost investing – and quite appropriately – sell coffee at-cost ($0.26) to those who crossed their path.
I would have loved to say hello, but wasn’t able to make out to one of the tour stops.
However, because I am a Vanguard customer, they emailed me about sending some coffee and a mug a few months ago.
I had completely forgotten about the exchange, and was pleasantly surprised to find a package waiting for me when I opened my mailbox hatch last Saturday with a sender label from Vanguard.
I rushed inside to open it and found:
- a whole lot of purple packaging confetti
- a small package of coffee that says, “If you’re counting beans, this coffee is for you.”
- and a coffee tumbler-like mug that says “Caution: The contents of this mug are extremely cost-effective.”
Tee hee hee. Is it too personal-finance-geeky to want to strut around with a Vanguard-branded coffee mug at every opportunity? I am officially a Vanguard fanboy – and no, this is not a sponsored editorial (although that mug did inspire me to finally write this post).
Now, I’m typically not one to be labeled as a sucker for corporate promotion. If you’ve followed the blog for any length of time and seen my Comcast hate diatribes, you know this. The reality is – I think most corporations have one singular goal at the expense of everything else: more profit. Most…
But I don’t think Vanguard is one of them. In fact, quite the opposite.
Many well-loved companies eventually bend to unending shareholder pressure to raise prices and lower costs (in a bad way) in the name of profit. For example: Apple, Amazon, Netflix. And those are just a small sampling of the well-loved ones…
Vanguard? They’ve been dropping prices since before I ever started investing. You’d be hard pressed to find any non-Vanguard ETF or index fund with lower prices than the comparable Vanguard offering. And if you did, it was probably just a temporary blip and Vanguard will beat it – or the company is using the fund as a loss-leader to win new customers and then gouge them on their other products.
Don’t believe me? The Vanguard fund average expense ratio is 0.19% vs. the industry average (1.08%).
We’re not talking pocket change here. We’re talking about an order of magnitude of 5X
This is not just clever marketing. Structurally, there are two things that set Vanguard apart from just about every other investment firm on the planet:
- Vanguard provides its services to the Vanguard funds at-cost. Their funds cost investors what they cost them to run.
- Vanguard is client-owned. As a client-owner, Vanguard investors own the funds that own Vanguard. The only “shareholder” Vanguard has are its customers. They are not a publicly traded institution, driven by financially incentivized shareholder greed.
Anecdotally, I can also personally attest that the two best customer service interactions I’ve ever had (and zero bad ones) were with Vanguard. Their customer service reps were extremely knowledgeable, well-spoken, well-trained, and empowered. It’s a stark contrast from the profit-driven, cheap, un-empowered, inexperienced customer service we’ve all become accustomed to.
In fact, much of what they do is in contrast to the profit-driven capitalist pitfalls we’ve all become accustomed to.
So while there are some other decent investment funds out there that Vanguard does not replicate and some investment brokerages offer lower cost stock/bond/non-Vanguard fund trading (I do maintain brokerages elsewhere for this purpose) – if you strictly want low-cost passive investing (the kind that not even the pros can consistently beat), all roads lead to Vanguard.
When I highlighted 3 low-cost Vanguard S&P 500 index funds not long ago, I think I might have put the cart before the horse a bit. This post serves as the horse, if not a comprehensive Vanguard review.
Why should you love Vanguard? Bottom line: Vanguard gives the average amateur investor like you and I a fighting chance at investing success.
Thanks for the mug, guys.
I joined Vanguard a few months ago and didn’t get a coffee mug, but with all the money that I’m saving by paying extremely low fees I will be able to buy one or two coffee mugs.
Vanguard is great. I’m just a little upset that I didn’t jump in the Vanguard bandwagon earlier – at least I’m on it now. I recommend Vanguard to everybody I cross paths with because it’s hard to beat their fees. More money in your pocket!
Love that! Hopefully now that I’m a member (as of last month – woot woot!) I can get these awesome emails too :) So far I haven’t met many haters of Vanguard and I’ve been asking around!
I haven’t found any either. It’s hard to be a hater – extremely well run and customer focused.
I totally agree. Been a Vanguard customer since 2008. I was strongly recommended to them by a friend who has invested with them since the 1980’s!
Their funds are all very well regarded and their costs are the lowest. I even got my wife to take some of her savings and start an account with them. She is still analyzing what funds to take.
But if anyone asks me, I would say go with Vanguard all the way.
Geek on! I’m jelly of the mug.
Right now I use Betterment which has some Vanguard in their mix. If they ever screw up or close up shop that’s where I’m heading.
I set up a solo 401k with Vanguard on my uncle’s recommendation when I started my own B2B independent contracting S corp, and have since rolled over my old work 401k and am in the process of rolling over my IRAs. No fees and low expense ratios are too good to pass up.
I was fortunate enough to become a Vanguard customer by default through my work’s 401k. Since then I’ve spoken to their customer service reps on several occasions, and used their website often, and I always come away happy. I plan to start my ROTH IRA through them soon, great company.
I’m also a Vanguard fanboy. A friend of mine that worked a big NY investing firm said their 401K was handled by them and said they were the lowest cost provider so I used them for my mutual funds. That was 5 years ago and I have nothing but praise for them to this day. I also received the mug and coffee in the mail from them the last time they did a tour on the East Coast. Amazing.
I was a fan of Vanguard before, but I might be even more now. It is these types of business practices that show you where a company’s values lie!
I’ve been Vanguarding for almost 5 years now with my Roth IRA and don’t know why anyone would choose any other company for a retirement account. Low cost funds, great customer service and account balances that go up more often than not. Vanguard 4 life.
A corporation that actually bases their business on outstanding service instead of maximizing shareholder value? Color me surprised! (seriously)
We just opened IRAs with Vanguard too and love them! So happy we did. The process was SO much easier than I had ever imagined. I shouldn’t have put it off for so long!
I really enjoyed reading this email because my husband and I are Vanguard fans too! (And I am really envious of that coffee mug…)
I have a 457b through work and our fund manager is Fidelity Investments. Now, as I understand it, going through them means that any contributions I do through them deducted from my paycheck means that it reduces my income (federally) for taxes. Can I get the same thing done w/ Vanguard, and how do I know if my fund manager is privately-owned?
Just thought I’d jump in here since I know others with Fidelity employer accounts. They are a privately owned fund manager, although more tightly controlled by the founder’s family. I’ve recently checked low-cost index funds at Fidelity, Schwab, and Vanguard and found all of them to be in the same ballpark. To receive any company match, you need to maintain your account with Fidelity and contribute whatever amount is required to receive the maximum match. You should have some perfectly good index funds to choose from there, so definitely look if you haven’t already.
As for taxation, you’ll need to check whether you have a regular 457b or a Roth 457b. The regular account defers taxation until retirement. With the Roth, you pay taxes today in order to have tax-free earnings in retirement.
You can open a separate IRA or Roth IRA at Vanguard and contribute money separately from your 457b. Just be aware that there are limits to how much you can contribute per year, which depend on your income and age. But even if you already contribute the max allowed by IRS, you could open a regular taxable account and invest that way.
Hope that helps, even though it’s hard to give a definite answer without more details. A good financial planner (who only has fee-based compensation) will be a great help for individual situations.
I was wondering if anyone has heard of Primerica or Prime America. Recently we have been approached by a rep for life insurance and investing opportunities. I should point out that the person who approached my husband and I is family (by marriage). I don’t know much about the company other than what I can google and some reviews were not that great however they didn’t review the actual services.
My husband and I want to start investing and set up our IRA accounts but are conflicted as most are initially on where to go. I have been interested in Vanguard but I was hoping some of the readers had any experience or knowledge on Primerica.
Thanks for any help!
I have used Vanguard for a little over three years now, and have nothing bad to say about them. I would always recommend their services. I started using Vanguard after gaining some knowledge about personal finance.
Just a week ago, I opened and account with vanguard (Total stock market index fund). I’m a 33 year old, wish I would have done it long ago. Had a friend pushing me to open one up with T. Rowe Price but I think I was too intimidated by the process and just gave up. Have been saving with my company 401k since I started working, read on your website and others about index funds the about Vanguard. Glad I chose them and thZnk you for what you do. Just joined your list of email updates. Thank you!!!
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