What does an 800-pound gorilla say?

Written by John Osbon on January 19, 2011

Whatever it wants.  When the gorilla is Vanguard, the world’s largest mutual fund manager with $1.6 trillion in assets and the fund company that attracted more new assets in 2010 than any other, the gorilla is worth listening to.

What Vanguard has been saying for decades is that investors deserve three fundamental tools for their portfolios: low costs, indexing, and diversification.

Already known as the low-cost provider, Vanguard shook the money management industry this year by lowering fees even farther and introducing 17 new cost-conscious ETFs to complement its mutual fund lineup.

Take VOO, for example, Vanguard’s ETF version of the S&P 500. VOO’s expense ratio is a virtually invisible 6 basis points (that’s six one hundredths of one percent).  That means almost all of the return goes to the investor.  Vanguard simply makes it up on volume.  On $1.6 trillion in assets, even with the skinniest fees, there’s plenty earned to buy bananas.

Vanguard’s low expenses are a core feature in the firm’s brand. The company, led by iconic founder and author Jack Bogle, was also a pioneer in indexing, and over the years has added more and more investment options to provide investors with highly diversified portfolio building blocks.

According to this Bloomberg report, “Vanguard passed Fidelity Investments last year as the biggest mutual-fund manager. It ranks third in ETFs behind BlackRock Inc. and State Street Corp.”

Vanguard CEO Bill McNabb, in his annual comments on the company describes the firm’s expenses as two-thirds lower than 30 years ago. Although change is rampant in the investment business, McNabb advocates some proven, traditional approaches. “For as much change as we’ve experienced, investment fundamentals have not changed. You hear talk about a ‘new normal’ for the economy and for the markets, but the ‘old normal’ applies when it comes to investing: Have a balanced and diversified portfolio. Maintain a long-term perspective. Keep your costs low. Save more than you think you need. These principles have held up through good times and bad, and they will not change,” he says.

And that’s how a gorilla grows to be 800 pounds.


  • This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
  • “Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
  • Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
  • Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
  • This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
  • While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
  • Adviser does not endorse the statements, services or performance of any third-party vendor.
  • Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.