A Profile of Vanguard, One of the Leading Mutual Fund Companies

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Vanguard is one of the largest and most well-known investment management companies. It manages almost $2 trillion in 170 different mutual funds.

What Does Vanguard Do?

Vanguard is what is known as a mutual fund family. That’s an investment company that oversees and markets a group of mutual funds. Vanguard has a distinctive history, because it was the first to introduce index mutual funds to individual investors. Because index funds are passively managed, with no input from stock pickers, they cost less to run. The introduction of index mutual funds made it easier and less expensive for individual investors to get a piece of the market.

Vanguard History: Push Low-Fee, No-Load Funds

The company was founded in 1975 by John C. Bogle. While a student at Princeton, Jack Bogle wrote a thesis paper that found that mutual fund stock pickers were not necessarily offering added value. A good percentage of investors would do just as well if they invested in the 500 largest U.S. companies, as benchmarked by the Standard & Poor’s 500 index. Some fund managers could pick the right stocks, but the fees and taxes involved with running the fund ate up the additional return. With an index fund, shareholders would pay only operating costs. At the time, there was no way for individuals to invest in an index like the S&P 500. (Some institutional index funds existed, but individuals could not get direct access to them.) Bogle found a way to make that happen. In 1975, the Vanguard 500 index fund was born.

By 1977, Bogle had made Vanguard a no-load fund firm. That means that investors pay no commissions or sales loads when buying or selling shares of any of Vanguard’s mutual funds. This also saves investors money. This focus on helping the individual investor save and invest more cost efficiently drove the 401(k) movement that came a few years later. As 401(k)s gained popularity, Vanguard became a household name offering low-cost funds with good performance results.

Vanguard Today

Today the Pennsylvania-based Vanguard is the second largest fund company in the world after Fidelity. It’s mission remains the same: To take a stand for all investors, to treat them fairly, and to give them the best chance for investment success. Vanguard now offers exchange-traded funds as well as mutual funds, and provides brokerage services and financial planning. The company even offers a few actively managed funds, run through outside investment firms. The company is one of the most trusted financial institutions around, and its funds are known bargains. The average expense ratio for Vanguard funds is about 0.20% compared to 1.5% for actively managed funds.

Jack Bogle, a hero to many finance fans, retired in 1999. He has written many bestselling books, including Bogle on Mutual Funds. Common Sense on Mutual Funds. John Bogle on Investing. Character Counts. and Battle for the Soul of Capitalism. He continues to tout a simplified, sensible investment approach.

Disclaimer: The content on this site is provided for information and discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.