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Vanguard Attracts Record New Money As Investors Flock To Passive
FYI: The firm, which has grown to become the world’s largest mutual fund manager by offering low-cost investments, attracted $148 billion in new client money during the first six months of 2016, surpassing its previous first-half record of $140 billion set last year, a spokesman said in an e-mail on Tuesday. In June alone, about $30 billion flooded into the firm’s mutual funds and exchange-traded products Regards, Ted http://www.bloomberg.com/news/articles/2016-07-05/vanguard-attracts-record-new-money-as-investors-flock-to-passive
The same article also mentioned that Fidelity has launched index funds with even lower expense ratio than Vanguard. Are these funds profitable to Fidelity or just a move to attract new money?
Speaking for myself (and I am unanimous in this) I am drawn to Vanguard not for its passive indexing, but low costs. I only hold one VG fund -- VMVFX -- which is dirt cheap and has an eclectic enough global equity exposure that I appreciate. (I bought it for those qualities, not because of it's name.)
I have to wonder all these people flocking into passive funds will flock right back out in abject terror during the next major - and sustained - period of market volatility to the downside. After all, investing, however you do it, active or passive, looks awesome when everything's going up.
After all, investing, however you do it, active or passive, looks awesome when everything's going up.
Many investors also learned that actively managed funds don't necessary provide much downside protection as observed back in 2008. Few funds including balanced funds did better because they held oversize cash position or bonds. Like you, low expense ratio is an important consideration for us as well.
@Sven: Yes indeed. And then there's the question of 'active share' and how a fund does viz-a-viz the market and/or its competitors. I hold a few funds with high active share, and it's nice to know they zig when the rest of the herd (er, market) zags. Maybe not enough to offset any decline (especially when all correlations are 1) but drawdowns tend to be managable by comparison.
Comments
Speaking for myself (and I am unanimous in this) I am drawn to Vanguard not for its passive indexing, but low costs. I only hold one VG fund -- VMVFX -- which is dirt cheap and has an eclectic enough global equity exposure that I appreciate. (I bought it for those qualities, not because of it's name.)
I have to wonder all these people flocking into passive funds will flock right back out in abject terror during the next major - and sustained - period of market volatility to the downside. After all, investing, however you do it, active or passive, looks awesome when everything's going up.
@Sven: Yes indeed. And then there's the question of 'active share' and how a fund does viz-a-viz the market and/or its competitors. I hold a few funds with high active share, and it's nice to know they zig when the rest of the herd (er, market) zags. Maybe not enough to offset any decline (especially when all correlations are 1) but drawdowns tend to be managable by comparison.
You stated: "Speaking for myself (and I am unanimous in this)"
Guilty as charged, and also many other British comedies old and new. Though truth be told, after I wrote that I kind of snickered at myself. LOL