Vanguard Isn't Taking In As Much Money; Neither Is Anyone Else: Podcast

Ted

FYI: Vanguard Group is attracting a lot less money from investors this year compared with 2017. Turns out, the mutual fund giant’s not alone.

Vanguard, the world’s second-largest money manager, collected $138 billion in the first half of 2018, down from $237 billion in the same period a year ago, according to the firm. That’s a decline of 42 percent. By comparison, total U.S. fund flows -- money going into exchange-traded, active and passive mutual funds -- fell roughly 50 percent, according to Bloomberg estimate
Regards,
Ted
https://www.bloomberg.com/news/articles/2018-07-06/vanguard-isn-t-taking-in-as-much-money-neither-is-anyone-else

johnN

Related. Sorry already posted pls delete

Ted

@johnN: Already linked it !
Regards,
Ted
https://www.mutualfundobserver.com/discuss/discussion/42109/goldman-sachs-etf-takes-aim-at-fee-based-advisors#latest

catch22

Aside from what may be less money coming into the houses for investment, are the large number of boomers who will continue to click over into the age 70.5 required minimum distribution mode. This money will likely be spent into the economy somewhere and not likely find its way back into taxable accounts for investment.

Derf

@catch22: " This money will likely be spent into the economy somewhere and not likely find its way back into taxable accounts for investment." Interesting thought or question.
Have you tried to find out % RMD's being invested or spent ?
Derf

catch22

@Derf
No, I have not attempted to find how much RMD monies is being re-invested; as I'm way short on free time this summer.
But, a nice project for an investment article writer, eh?
Good night,
Catch

msf

A quick search turned up this Financial Adviser Mag article from 2014. It cites a Vanguard figure saying that 20% of RMDs were reinvested there.

Of course that's only Vanguard investors, and may only count the RMD money that they reinvested at Vanguard, as opposed to moving it to an outside taxable account. Still, good for a ballpark sense.

https://www.fa-mag.com/news/what-if-your-client-doesn-t-need-the-rmd-19538.html

hank

The mutual fund firm Vanguard, in its column “IRA Insights,” said that approximately 20 percent of its investors who take RMDs move the money to a taxable account because they do not need to spend it. (from article provided by @msf)

That’s a curious statement for Vanguard to make. How do they know that? I guess they must have conducted some sort sort of study in which they queried their investors. Reason I’m curious is because at Price I routinely have RMDs (and all other IRA distributions) transfered first into a cash equivalancy non-sheltered account on which I can write checks or otherwise transfer from at a later time. (I use their ultra-short fund for this purpose.) There’s a lot of reasons for doing this. Most importantly, I feel that should the distribution process somehow get “muffed” (perhaps by incorrectly withholding Michigan’s pension tax against my instructions), it would be a lot easier to resolve the issue with Price while the money is still under their umbrella.

Now to the crux of the issue here. Sometimes the RMD or other funds I take from a sheltered account are actually “needed” right away. But much more often they’re simply “rolled” into an annual household budget and may not actually be spent for up to a year. At still other times the purpose of the money is simply to “replenish” depleted cash reserves after an unusually large / unexpected household expenditure. So tracking the actual purpose to which withdrawals from an IRA are ultimately applied would seem to be a difficult (near impossible) undertaking.

Just my H/O on this one ... But I’ve long felt that way too much is made of being “forced” (author’s word) to withdraw a small percentage of sheltered funds annually upon reaching RMD age. There are some great tax efficient stock funds which have been discussed here over the years. Munis are a possibility as well. Recently while I was using Price’s high yield muni fund (PRFHX), it seemed to be consistently outperforming their Spectrum Income fund (RPSIX) which I hold inside an IRA. Risk level appeared about the same too. My thinking on this, however, might be warped, as have about 65% of retirement monies inside a Roth.

Old_Joe

@hank- Seems to me that it wouldn't take much effort for a mutual fund company to take a representative sample of accounts in the RMD phase, and keep an eye on the average (not in the mathematical usage) cash account level once the transfers have been made. If, for a number of years before the RMDs the cash accounts maintained a certain average level, and then that level increased after the RMDs began, it would be a fair guess that those account owners didn't need the RMDs for spending purposes. Rough guess, but probably indicative.

OJ