John C. Bogle founded Vanguard on May 1, 1975, and over the past 50 years, the asset management firm has transformed the way we invest.
Indeed, in 1976, Bogle launched the First Index Investment Trust, which was later renamed the Vanguard 500 Index Fund (VFIAX). Its purpose was to give retail investors broad-market exposure at a low cost, and its strategy was to simply track the S&P 500 Index.
In 2001, Vanguard began offering its mutual funds as exchange-traded funds, launching the Vanguard Total Stock Market ETF (VTI) as a lower-cost, more accessible offshoot to its Vanguard Total Stock Market Index Fund (VTSAX).
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The firm’s fund offerings now stand at 215 in the U.S. and 225 in international markets.
Most popular are the Vanguard 500 Index Fund and the Vanguard S&P 500 ETF (VOO), with net assets totaling $1.3 trillion.
What’s more, VOO recently surpassed the SPDR S&P 500 ETF Trust (SPY) as the largest exchange-traded fund, with assets under management of $605 billion.
Low costs, accessibility are key to Vanguard’s approach
True to its word to keep costs as low as possible, Vanguard became the first fund group of its size to switch to no-load mutual funds. In other words, it would not charge sales tax on purchases of Vanguard funds.
Since 1975, its average expense ratio has dropped to 0.07% from roughly 0.7%. The current ratio is well below the industry average of 0.44%.
More recently, Vanguard initiated a massive fee cut on nearly 90 funds to lower costs even more.
“50 years ago, Jack Bogle started a revolution,” says Vanguard CEO Salim Ramji. “Everything we do is grounded in the belief that investing should be lower cost and more accessible.”
In addition to introducing cheap ETFs and mutual funds, the investment firm in 1995 began offering a “Plain English” fund prospectus for its funds to cut out confusing investing jargon and legalese.
And in 2003, the investment firm launched target-date funds, the set-it-and-forget-it funds that are popular in retirement savings plans.
Vanguard’s approach, Ramji adds, has “earned the trust of 50 million investors.”
Bogle’s best advice
Vanguard founder Jack Bogle is known for his timeless advice, and each year, followers gather together during the “Boglehead Conference” to recall his adages.
Among them is Bogle’s insistence that “costs matter” when it comes to investing.
“To a modern investor, this is just common sense,” wrote Kiplinger contributor John Waggoner in January 2019 after Bogle passed away. “The less money you give to your fund (or your broker), the more money you keep. But to people in the pre-Vanguard world – especially those in the mutual fund industry – it was heresy.”
Bogle is also known for saying, “Don’t look for the needle. Buy the haystack.” In other words, investors are better off owning a broad, diversified portfolio rather than trying to pick individual winners.
And most relevant to the jittery market we currently find ourselves in is Bogle’s advice to “stay the course” and not make knee-jerk reactions to volatile price moves.