Vanguard: What and What are They

What does it mean when someone says, “Oh, I Vanguard” or “I use Vanguard”.  There is even a line or two when people talk about investments in a conversation, and someone says, “I let Vanguard handle everything”.  Well, my goal is to explain and put that to rest.  This all came from an interesting conversation with one of my best friends.  He felt that this information was necessary for the community to read.  Especially those starting out to invest and wanting to know more terminology, where it comes from, what it means and the impact to them.  Therefore, I will do my best to explain the “who” and the “what” in Vanguard.

What is Vanguard?

Here it goes – Vanguard is NOT a person!  That’s the first statement that I will make.  Therefore, when someone says – Vanguard handles everything for me, it is not a single individual.  Vanguard is actually an investment firm, based in Pennsylvania.  They are one of the biggest investment firms in the world.  They manage over $5 TRILLION in assets of individuals all over the world, in fact.  Additionally, their corporate structure is of a mutual company.  Essentially, the company is owned by the customers whom have their funds being managed.  Additionally, the company’s founder was John C. Bogle, an investing icon.

Who is John Bogle?  He has earned the credit & recognition of being the first to create an index fund available to individuals (Bert has explained what an index fund is here, a great read to understand more).  His conclusion is that mutual funds perform better than an active fund manager, due to fees and the potential poor investment decision, as a passive index fund would own the entire stock index as a whole, such as the S&P 500 (i.e. the 500 largest companies by market capitalization).

In conclusion, Vanguard is an investment firm that will gladly accept your money to place in one of their investment vehicles – such as retirement accounts, 529 plans or individual-trading accounts.  Further, their investments are also endless, offering mutual funds, exchange traded funds, stocks, options, etc..

What does Vanguard-ing mean?

Another statement, as mentioned earlier, is that people will state that, “they Vanguard”.  What exactly does that mean?  Well, there are quite a few employers that have been engaged with Vanguard to be their investment platform for their employees, first off.  Therefore, your 401(k) and other savings/investments may be at Vanguard.  Typically when that occurs, your investment options are… guess?  Vanguard products – such as their mutual funds.  Their most popular is the Vanguard S&P 500 Index or the  ticker symbol, VFIAX.  When I was working at my previous employer, my most basic and most popular investment option was Vanguard’s Institutional Index Fund (VINIX), which essentially also tracks the S&P 500, in a passive way.

However, that’s not all it means.  It’s also an approach to investing, when someone, “Vanguards”.  I will describe what this approach is.  When someone “Vanguards” or is “Vanguard-ing” this means that they are consistently & automatically investing the same specified amount of money at a consistent time interval into one or very few passively managed index mutual funds.  What they have done is listen to John Bogle’s main philosophy that passively managed index funds will consistently outperform any other fund.  Additionally, they are dollar-cost-averaging the position over the duration of their career or life.  Dollar-cost-averaging, of course, meaning their contributions are buying the index fund prices at high and low points.

My thoughts on Vanguard

Vanguard is great.  I have nothing wrong with the firm, especially if they are the only option you have as an investor, as an employee, etc..  They have great low-cost/low-expense ratio mutual funds that cover the entire stock market.  Further, most of their funds may pay a dividend on a quarterly basis. As a dividend investor, that touches my heart.

However, we all know I am a, “gosh damn Dividend Diplomat”, though.  I currently do not consistently invest into a Vanguard product, at this time, in my own individual accounts.  However, if they are ever offered by an employer – I am all over it and would highly recommend it, actually.  In fact – I recommend any Vanguard fund that tracks the S&P 500 or Total Stock Market, as they will typically pay that quarterly dividend and will take the “thinking” out of investing.

In conclusion – I hope that this provided more information on Vanguard.  Vanguard is not a person, but an investment firm.  When someone “Vanguards”, it means that they are consistently & automatically investing into one or few mutual fund/exchange traded fund products, to take the emotion out of investing!  To start with the company on your own, the minimums usually are $1,000 or $3,000 to begin.  In addition, if you consistently invest and elect to receive electronic communication, fees are also waived, I believe (Definitely verify/validate that though!).

Now my question is – do you “Vanguard”?


8 thoughts on “Vanguard: What and What are They

  1. Nice summary, Lanny.

    As you mention, I really think of Vanguard as a philosophy. It’s about not trying to outsmart the market and, importantly as anything else, keeping fees to a bare minimum. Vanguard has the scale and mindset that allows investors to get full market exposure without taking on exorbitant fees.

    As a Canadian where my fellow investors pay the highest mutual fund expenses in the world, I can certainly appreciate Bogle’s approach. Like yourselves, though, I ascribe to the DGI way of doing business as an investor.

    Take care,

    • GRB –

      The philosophy is key. They pioneered that philosophy. Turn out the noise, keep it consistent and keep it cheap, haha.

      In Canada – is there a similar brokerage firm that has the same philosophy – index funds, low expense ratio and low minimums? Would love to know this! Thanks GRB, talk soon.


  2. I love the concept of Vanguard as I generally subscribe to the KISS or keep it simple stupid philosophy of life. Unfortunately, I don’t use Vanguard as my employer doesn’t offer them as an investment option for my retirement account.

  3. I have Vanguarded, I do Vanguard, and suspect I always will Vanguard.

    While I have never had an employer that used Vanguard to service the 401(k), I did have a Simple IRA back from my days as a contractor and that was through Vanguard. I also previously setup our Traditional IRA and Roth IRA accounts at Vanguard. Lastly, when establishing my DGI portfolio, I started with VYM as I did my research into what individual stocks I wanted to purchase–and even though my portfolio is now more established, I plan to maintain my holding in VYM.

    With that said, I do encourage people to compare options because as much as I love Vanguard, they are not always the cheapest option in terms of expense ratios anymore. I do think they have pioneered that space, but it has become much more competitive in the last couple of years.

    • DivvyD –

      Thorough response, I love it. Definitely have to compare, evaluate and see what is out there, no doubt. They have pioneered the simple index funds and ETFs and have their name for it. But I agree – other providers are offering free funds, free trading, etc.. that now – the landscape is starting to even out. There are many options out there, which has its pros and cons, similarly, of course. Thanks again for the Comment Divvy D, talk soon!


  4. I have my taxable account, SEP IRA, Roth IRA, and 401(k) at Vanguard. I think Fidelity has caught up and is just as good, but like having everything in one place. I wish they offered an HSA.

  5. Great summary. I love Vanguard, but using their platform since 2015 and always recommend newbs to investing to consider their platform. Some other financial services are catching on to the game, but they still are the winners in my book. Index funds for the win.

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