Costs Matter: Vanguard Long-Term Performance Update 2015

My Money Blog has partnered with CardRatings for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. Thank you for your support.

costsmatterThe purpose of Vanguard’s commitment to low-cost investing is not just to be cheap, it is to give their clients higher performance. Whenever a money manager charges higher fees for themselves, they will have to compensate by creating that much higher returns through whatever combination of skill or luck.

Over long periods of time, the luck tends to shake out and the higher expense ratios usually become a very hard hurdle to continually overcome. (In turn, this pressure also leads some managers to take increasingly risky bets and have luck either save their butts or lose all their client’s money!)

Taken from a recent Vanguard article, the chart below confirms this tendency. It shows the percentage of Vanguard funds in each major asset category that exceeded the average returns of their competing fund peer groups (as determined by industry-standard Lipper) over the 1-, 3-, 5-, and 10-year periods ended December 31, 2014.

vglipper_small2

Every single number on that 10-year return column is 90% or higher. Every asset class. Is that something I could interest you in?

My Money Blog has partnered with CardRatings for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.



User Generated Content Disclosure: Comments and/or responses are not provided or commissioned by any advertiser. Comments and/or responses have not been reviewed, approved or otherwise endorsed by any advertiser. It is not any advertiser's responsibility to ensure all posts and/or questions are answered.

Comments

  1. simplesimon says:

    I think it’s worth pointing out that the number of funds in the peer group shrink the longer the period is. It could be that there are more mutual funds today than ever before but my feeling is that many mutual funds that existed 10 years ago have since closed. Vanguard funds stand the test of time.

    • Probably a combination of both. But definitely many funds have been closed over the years, take for instance the number of US stock funds that remain after 20 yrs:

      “Morningstar shows 1,105 choices available as of Jan. 1, 1995 (counting each share class separately). From this crowd 491 survive, and 151 of the survivors have beaten the S&P index fund.
      Your chance of hitting a win with an active fund over a very short period might be 50-50. Over two decades it’s a 1-in-7 long shot.”

      From this Forbes’ article.
      http://www.forbes.com/sites/baldwin/2015/01/21/is-vanguard-too-successful/3/

Speak Your Mind

*