Economist Burton Malkil called the index fund "the most important financial innovation created for an individual investor." And one glance at Vanguard Innovation Foundation performance over the past ten years has shown that many individual investors agree.
Over the past 12 years, Vanguard has taken more money on a net basis than any other firm, according to Morningstar. Only one firm, BlackRock
a subsidiary of iShares, which was listed in the list of the best recipients of flows every year since 2007, and nearly 2 trillion. Dol doubles the dollar that iShares has over the past 1
Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, called Vanguard the "Amazon Asset Management" when he learned about Vanguard's leadership over competition, saying in an interview with MarketWatch that comparison is appropriate not only because both companies were leading innovators in their industries, but because they used their own scale to lower prices and create unprecedented brand loyalty.
"Amazon is the first place where you buy something, whether it's the cheapest or not. And Vanguard is the first place that comes to mind when purchasing low-paid investments, "he said.
Vanguard, and especially John Bogle, was the pioneer of so-called passive investment strategies, the marketing of the world's first index fund in 1975, which sought to track benchmarks such as the S & P 500
SPX, + 0.15%
instead of actively choosing stocks, trying to outperform the index. Since the fund was not actively managed, Vanguard was able to offer funds at the lowest prices, compared to other mutual financing companies, which typically use teams of analysts and asterisks to identify investments.
Todd Rosenbluth, senior ETF Director and CFRA Mutual Fund Research, told MarketWatch that the popularity of such index funds has been steadily increasing since then, with the trend towards a low index of investment indexation, has been increasing over the past decade.
"Avant-garde was in the sweet spot of two trends that dominated the management of wealth," he said. "We have witnessed significant changes in the direction of investment in the index over the past 10 years, and in the active world of governance there has been a shift to low-cost active investment," said Rosenblut. "Thanks to its low cost investment culture as well as its mutual ownership structure, Vanguard is able to reap the rewards of those who also want low paid active management."
Vanguard is a company owned by a company in which shareholders own funds offered by Vanguard, which in turn owns its own company.
However, today, this is not always an addition to the company, as for Amazon's industry, given the growing fears. in some quarters over the domination of Amazon in e-commerce. Even Bogle, the founder of Vanguard, began to wonder if Vanguard and the index fund revolution were "too successful for their own good."
In a November edition of the Wall Street Journal, Bogle pointed out that index equity funds have risen. "If historical trends continue, then some gigantic institutional investors will one day control the voting of virtually every major US corporation," he wrote. "Public policy can not ignore this growing dominance and take into account its impact on financial markets, corporate governance and regulation. These will be the main issues in the upcoming epoch. "
Some critics have gone so far as to say that passive investment harms capitalism, because passive investors are not involved in the analysis of securities that help them to be accurately valued. Rosenblut says that such fears are exaggerated, since "most stock trading operations are bonds that are still active at an individual,"
. funds can be vulnerable to manipulations and conflicts of interest. "Conflicts of interest should disturb anyone who is invested in index funds, which includes many Americans with retirement accounts. Index providers have tremendous power. The decision to include a company in S. & P. 500, for example, leads to a redistribution of billions of dollars of investor money. The average company added to S. & P. 500 profits; when it is removed, its share price decreases when index funds sell their holdings, "wrote the authors of the article, Robert J. Jackson Jr. and Stephen Davydoff Solomon. than individual stocks.
With regard to Vanguard's success, the research director claims that the growing popularity of the type of passive investment that the company has become the first will require leading passive firms to take responsibility for their role in corporate governance. "As the concentration of ownership of shares between several firms becomes larger," he said, "they must make sure shareholders know why they have made decisions that they have."
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