Vanguard Comes To Boston

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OSBON_017Vanguard just convened its 2014 Investment Symposium atop 60 State Street. In the #1 spot with over $3 trillion in investment assets and growing more rapidly than its competitors, Vanguard always gets our attention. Amid a roomful of investment professionals, Max and I listen carefully as Vanguard presented “Three things to see that others don’t.”

Unnecessary underperformance
Underperformance matters more than outperformance, according to Vanguard. In other words, the harm of not getting market returns is much more important than the benefit of beating the market. That one or two percent that you may miss each year by chasing hot stocks or market timing can derail your efforts to meet long-term goals. How does Vanguard know? Through research. See chart below:

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Danger in disguise
Big, well-known, highly reputable experts publish ratings that pick “winning” funds based on what looks like reasonable standards. Millions of investors trust these ratings as they choose investments. Unfortunately, the ratings have little to no predictive value. They describe what a fund has done in the past, not what it will do in the future. Again, the facts tell the story…but most investors never get the complete facts. As a result money flows into 5 star funds that then start performing like 1 or 2 star funds.

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Highest rated, worst performing Morningstar funds

Are you TWA?
In order for investors to succeed they must have the “time, willingness and ability” to manage an investment portfolio. And you need all three, not just one. Does this sound like you? If so, Vanguard and others provide valuable information and products to assist you. If not, definitely use an investment professional. Here’s the three percent annual return that an impartial, cost conscious and attentive professional can help you earn:

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Quantification of Vanguard Advisor’s Alpha

Vanguard makes it clear
Investing has long been viewed as a race to the top where the smartest, bravest and shrewdest investor wins. What Vanguard has revealed over the last 30 years, both through the performance of its index funds and messages like we heard at its symposium, is that most of the behaviors an investor might adopt in that effort will be counterproductive. The harder most investors race, the faster they fall behind.

By focusing on cost control, accepting the riches of market level returns, ignoring most of the noise coming out of Wall Street, and having the humility to utilize professional guidance, investors  can win the only race that matters – reaching long-term personal financial goals. We thank Vanguard for reminding us of this at every available opportunity.

John Osbon – josbon@osboncapital.com


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