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The Vanguard Group - Definition and Overview |
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The Vanguard Group is an American investment management company that offers mutual funds and other financial products and services to individual investors and institutional investors in the United States and abroad. Company headquarters are near Valley Forge, Pennsylvania. Its founder, John C. Bogle is credited with the creation of the index fund.
The Index Fund Philosophy
John Bogle did a study whereby he found around three fourths of mutual funds do not earn more money than if they were to invest in the largest 500 companies equally and simultaneously. In other words, three out of four of the managers could not pick better specific "winners" then someone just picking essentially every big company. In reality, the managers could pick specific stocks which would do about as well as picking the 500 largest stocks, but the cost to pay their salaries and other expenses ended up making the investor not make as much money as the index. The argument at the time was that it was impossible to invest in an index. John Bogle used this information and attempted to create a way that one could invest in an index, and the result was the founding of the Vanguard Group. His first index, called the Vanguard 500 (which invested in the 500 biggest companies), has since done better than every other competing large mutual fund from that time except one. 98 billion dollars are invested in this mutual fund, and the Vanguard Group have since created other, more specific index funds and normal mutual funds.
Since its founding in 1975, Vanguard has grown to become the worlds largest pure no-load mutual fund company. In addition to mutual funds, Vanguard offers brokerage services, variable and fixed annuities, and life insurance, as well as financial planning, asset management, and trust services.
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