In a live webcast that aired May 10, 2011, three distinguished panelists discussed indexing: Vanguard Chief Investment Officer Gus Sauter, journalist and commentator Jane Bryant Quinn, and Morningstar Vice President John Rekenthaler.
Jane Bryant QuinnAuthor
John RekenthalerMorningstar, Inc., vice president
Veteran index investors offer their thoughts on current issues as well as the future of indexing.
Index funds can deliver greater diversification, lower costs, and more tax efficiency than many actively managed funds.
Index and active funds can work together
We believe both approaches merit consideration for your portfolio.
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The roots of index investing
Vanguard blogger Craig Stock says indexing is an amazing success story—and not just at Vanguard. From a controversial, much-derided idea back in 1976, index investing has grown to be a widely accepted investment approach today.
We pioneered index funds for individual investors and have more than three decades of indexing experience. We've honed a strategy of selecting indexes that we believe best represent the target market. We then seek to track the indexes as closely as possible.
Our index funds, on average, cost about one-fifth the industry average for index funds so you keep more of what you earn.*
Our unique client-ownership structure allows us to offer conventional index funds and ETFs that can meet your long-term needs, not the latest investment fads. We're owned by our funds, which are owned by clients like you.
William F. Sharpe, a future Nobel Prize winner, authors an academic paper that lays the theoretical framework for indexing, concluding that "the most efficient thing to do is hold the market portfolio."
All investments are subject to risk. Investments in bonds and bond funds are subject to interest rate, credit, and inflation risk. Foreign investing involves additional risks including currency fluctuations and political uncertainty. Stocks of companies in emerging markets are generally more risky than stocks of companies in developed countries. Prices of small-cap stocks often fluctuate more than those of large-company stocks.
Diversification does not ensure a profit or protect against a loss in a declining market.
Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
You must buy and sell Vanguard ETF Shares through a broker like Vanguard Brokerage Services (we offer them commission-free) or through another broker (you may incur commissions). Vanguard ETF Shares are not redeemable directly with an applicant fund other than in creation unit aggregations. Like stocks, ETFs are subject to market volatility. When buying or selling an ETF, you'll pay or receive the current market price, which may be more or less than net asset value.
* Source: Lipper Inc. as of December 31, 2010. Vanguard index fund average expense ratio 0.16%, industry index fund average expense ratio 0.85%.