Why I Love Vanguard

If you're planning to choose a new brokerage firm in the new year, Vanguard should certainly be a contender. The firm embodies many of the values that make long-term investing success possible. This paradigm comes out through a majority of their investment offerings and even in how the firm is structured.

Let's look at the reasons why I believe Vanguard is a top choice for long-term investors.

It's owned by its investors

While most investment firms are publicly traded companies with large swaths of unknown shareholders, Vanguard prides itself on being owned by its investors via its proprietary funds. While publicly traded companies have to cater to the needs of outside shareholders, Vanguard faces no such conflict of interest and instead exists for the benefit of people who invest money with them.

On a very basic level, this should give the average investor confidence that their money is invested for their benefit and not for the benefit of management or some outside stakeholder. Many investment management companies rely on high fees and lower-than-ideal levels of transparency. Vanguard tries to avoid these conflicts of interest by being a true investing co-op — a refreshing, albeit uncommon, structure in the money management space.

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Vanguard looks to the long term

Vanguard is committed to the long-term interests of its investors — not the day-to-day gyrations of the stock market. Vanguard funds are meant to be held for many years; if you need to sell out of a Vanguard mutual fund, you won't even be able to buy back in to the same one for 30 days. This is just one illustration of Vanguard's firm commitment to long-term investing and its strong encouragement that you not touch your investments even when the market goes haywire.

Vanguard also doesn't focus on the latest “hot” trends of the moment; instead, Vanguard champions itself on taking a big-picture, long-term view at all times. You won't find cryptocurrency, NFT, or meme-stock funds there. By owning entire swaths of stocks through index funds and ETFs, you're giving yourself the highest odds of success in the long run.

Cost control is a priority

Keeping costs minimal — in the form of trading fees and fund management costs — is at the very core of what Vanguard believes. Jack Bogle, the firm's late founder, referred to traditional Wall Street managers as “croupiers” in so far as their management fees have the tendency to eat away at an investor's financial returns. Essentially, he viewed costs across the industry as being way too high; ultimately, Bogle believed, fees and other costs could significantly eat into an investor's ability to enjoy the growth of their own portfolio.

In fact, there have been numerous studies, including this SEC study, that show a 1% management fee on the entirety of a diversified portfolio can reduce your total return by up to 33% over a period of 20 years. That could force you to work a lot longer to reach your retirement goals. By keeping costs as low as possible — many Vanguard funds can be had for an annual management fee of 0.10% or less — you allow yourself to keep as much of your returns as you possibly can. After all, they're yours!

Remember what matters most

Doing business with a company that allows you to reap the majority of your returns should be one of your top considerations when it comes to choosing a brokerage firm. Be clear that the firm you've entrusted with your money is putting your interests — not theirs — first.

Also, realize that some of the best investment products you can buy, like passive mutual funds and exchange-traded funds (ETFs), are now free or at least not very expensive. Good advice is available for free if you have the time and wherewithal to search for it. In the world of personal finance, fancier or more complex is not usually better.

These are some of the core reasons that people become Vanguard clients, and they apply especially to those focused on maximizing their long-term wealth. I'd suggest putting Vanguard at the top of your holiday investment shopping list — and expect to get a good deal.

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