How to Get More Out of Your Retirement Plan
You don't have to be a brilliant guru to start investing with Vanguard mutual funds. In fact, that's part of this rising money manager's appeal. For decades, Vanguard has followed a very specific investing philosophy that almost seems to contradict their profit margins. With level headed reason and excellent mutual fund options, here's why Vanguard is worth a look whenever you're hoping to expand your money.
The Philosophy of Vanguard
The Vanguard mutual fund group was created by John C. Bogle. The company owes much of its one of a kind vision to the tenacious financial viewpoints of Mr. Bogle, who is widely recognized as one of the most rational commentators around. Like a wise old owl, this man believes that investing is best done passively, without expensive oversight by self-styled experts, and over a long time horizon. His philosophy is so different from the rest of the field that Bogle is perhaps the only mutual fund manager to have spawned a zealous fan following, culminating in a book, The Bogleheads' Guide to Investing.
The Bogle worldview is summarized in one phrase: stay the course. After looking at history, John Bogle rightly notes that market averages have gone up over the past two centuries. This obvious, but crucial observation means you're all but guaranteed a return, just by investing to match the market. It's also the main reason why the mutual fund entity has used an old sailing ship as their corporate logo.
The Vanguard company is famous for tuning out media noise about the markets, whether it's doom and gloom or bullish hype. It's the end result that matters after years of investing, not momentary upswings and savage blows. Most Vanguard products are Index Funds and Exchange Traded Funds (ETFs) that minimize your risk and match the market by giving you a stake in a large variety of stocks, bonds, and commodities.
Vanguard's principles are built squarely on matching market returns, with minimal intervention by investors or money managers from the company. This results in fewer maintenance fees compared to competitors. A mutual fund elsewhere charging 2% per year may not sound like much, but it could really cut into your profits over a thirty year investing time line until retirement. By contrast, Vanguard's rates are typically well under 1%, and that passes monetary savings directly onto individual investors.
Designing a Portfolio of Vanguard Funds
Vanguard offers a wide array of Index Funds and ETFs that are suitable for investors of all stripes. Anyone who wants truly hands off investing to align with the market's fate is advised to seek out their target retirement funds. Like other popular choices in the mutual fund industry, these funds give you a well diversified mix of stocks and bonds according to your age. As you approach retirement, the shrinking proportion of stocks in your portfolio is replaced by secure bonds.
Investing with Vanguard mutual funds gives folks who enjoy customizing their own portfolios plenty of leverage as well. Simply purchase a mix of Vanguard's Total Stock and Total Bond Market funds, along with a handful of ETFs, to start off on the right note. If you're more risk tolerant and into actively managing your own portfolio, then try their funds specializing in precious metals, energy shares, and international stocks.
Even if you don't plan on investing with Vanguard mutual funds, consider checking out The Bogleheads' Guide to Investing for a no nonsense approach that's rare. Saving for retirement as soon as possible is important, especially if you're using passive index funds to match the market. Start using simple tips for living below your means today, and you're more likely to enjoy a stable tomorrow.