VALLEY FORGE, PA (May 13, 2013)—Vanguard today kicked off a campaign to emphasize the importance that costs play in long-term investing. The centerpiece of the campaign is the mobile At-Cost Café, which sells hot and cold cups of coffee for $0.26, or one-fifth the average price. The café is designed to raise awareness among investors about the impact of costs and help them understand how minimizing costs in their investment portfolios can potentially enable them to save more.
The café starts its seven-week U.S. tour today in San Diego, with scheduled stops in five other cities, including San Francisco; Chicago; Washington, D.C.; New York; and Boston. It will spend three days in each city in prominent, well-traveled locations. The full schedule and locations appear on the at-cost cafe website.
In addition to the café, Vanguard plans to increase its cost education efforts through its multiple online and social media channels during the next two months. Vanguard will tweet and post cost-centric content for its 88,000 Twitter followers, 280,000 Google+ followers, and nearly 125,000 Facebook fans. The company plans to elevate new content to its website (vanguard.com), focusing on how saving a little can go a long way, how costs can affect overall portfolio returns, and how investors are increasingly recognizing the power of broadly diversified, low-cost portfolios, the adoption of which has increased 400% since 1995.
Vanguard also recently published its Principles for Investing Success, which outlines four key fundamental tenets: 1) Create clear and appropriate goals, 2) develop a suitable asset allocation using broadly diversified funds, 3) minimize cost, and 4) maintain perspective and long-term discipline. Cost is significant because every dollar paid in management fees or trading commissions is simply a dollar less that potentially could be earning return.
“Planning for a financially secure retirement is a huge challenge that many individuals face in this country,” said Paul Heller, managing director and head of Vanguard’s Retail Investor Group. “Low costs are a critical factor in determining retirement readiness, and Vanguard believes that educating investors about cost will give them a better chance of investment success.”
Newly updated Vanguard research affirms that individual investors, financial advisors, and defined contribution plan sponsors are beginning to understand the key role cost plays in a portfolio. In Costs matters: Are fund investors voting with their feet?, Vanguard researchers found that in the last ten years, investors continue to commit the largest amount in assets to low-cost products, largely due to the popularity of low-cost index funds and ETFs. The researchers also found that the asset-weighted expense ratio for U.S. equity funds dropped by 31% from 2003 to 2013, to 0.64%. For U.S. taxable bond funds, the asset-weighted expense ratio dropped by 28%, to 0.47%.
Vanguard: The low-cost leader
Vanguard has championed low-cost investing since its founding in 1975. The average expense ratio for Vanguard funds decreased in 2012 by one basis point, to 0.19%—about one-fifth the industry average expense ratio of 1.11% (sources: Vanguard and Lipper, Inc.). Over the past four months, the company has reported expense ratio reductions for many of its largest, most widely held mutual funds, as well as more than 50 ETFs.
Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages nearly $2.2 trillion in U.S. mutual fund assets, including nearly $280 billion in ETF assets. The firm offers more than 170 funds to U.S. investors and more than 70 additional funds in non-U.S. markets.
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All asset figures are as of April 30, 2013.
Vanguard provides its services to the Vanguard funds and ETFs at cost.
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