Q&A: Why Vanguard?
Why always Vanguard? How is this journal/website/radio [show] funded?
This is my favorite kind of question for two reasons. First, because it implies healthy skepticism. Second, it allows an opportunity to explain how our firm, Vestory, actually works and what we believe.
Let's start with "Why... Vanguard?"
I wish we could suggest others. The problem is their lack of competition. Yes, there may be a couple of index funds and ETFs that offer competitive fees, but only one other firm offers a similar breadth of no-load, low-fee, non-actively managed passive/index funds; Dimensional Funds (DFA). Yet, because they fear the emotionally-driven trading of regular "investors," they require that their funds be offered only through some carefully selected advisors (take a look at this recent Bloomberg Business Week piece). Vanguard is the best choice we can find for DIY investors. We receive absolutely no compensation from Vanguard (other any other securities firm).
If you can any better investment ideas, we would love to hear them. Our entire staff is always looking for better ways to help people manage their investments.
So, how do we pay for this? Luckily, the Internet has made publishing online really inexpensive. When we started Vestory, Tom and I committed the firm to providing a high level of education. The expense of that education comes entirely from Vestory's revenues.
Because we have great relationships with both Vanguard and DFA, they allow us to use some of their educational material in Real Investing Journal. No compensation changes hand in either direction.
To allow us to afford these kinds of services and still keep our investment management fees below the industry's average, we struggle to keep other expenses in check. We don't pay ourselves a lot. Class A offices are out of the question.
Our biggest business expense is our educational outreach because we want to change the way people invest. Our goals aren't totally altruistic. We believe that, in the long run, providing these free services is good for us.
That doesn't mean that we won't start charging for some of the things we now give away, but we will never compromise our integrity in the process.