Well this is Disturbing [Vanguard pushing actively managed funds]

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Buddtholomew
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Well this is Disturbing [Vanguard pushing actively managed funds]

Post by Buddtholomew »

https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Re: Well this is Disturbing

Post by pizzy »

Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Outperformed "peer group averages"
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Re: Well this is Disturbing

Post by 9-5 Suited »

pizzy wrote: Mon Sep 13, 2021 9:16 am
Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Outperformed "peer group averages"
Their email to me said: “ Vanguard Core-Plus Bond Fund aims to outperform the fund's benchmark* and provide broad diversification to help reduce portfolio volatility.” They cited Barclay’s Agg Index as the one they intend to outperform.

I don’t really have a huge problem with this as I don’t believe in indexing in bonds in quite the same way as stocks, buts it is still potentially indicative of a shift at Vanguard that is worth paying attention to. Not scared yet as they still appear fully committed to low cost approaches.
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Re: Well this is Disturbing

Post by wilked »

suggest a better more focused title...
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Re: Well this is Disturbing

Post by pizzy »

9-5 Suited wrote: Mon Sep 13, 2021 9:23 am
pizzy wrote: Mon Sep 13, 2021 9:16 am
Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Outperformed "peer group averages"
Their email to me said: “ Vanguard Core-Plus Bond Fund aims to outperform the fund's benchmark* and provide broad diversification to help reduce portfolio volatility.” They cited Barclay’s Agg Index as the one they intend to outperform.

I don’t really have a huge problem with this as I don’t believe in indexing in bonds in quite the same way as stocks, buts it is still potentially indicative of a shift at Vanguard that is worth paying attention to. Not scared yet as they still appear fully committed to low cost approaches.
"Actively managed funds have been a significant part of our history going back to our start in 1975. In fact, our first 11 mutual funds were actively managed."

I think it's status quo
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Re: Well this is Disturbing

Post by MishkaWorries »

9-5 Suited wrote: Mon Sep 13, 2021 9:23 am
pizzy wrote: Mon Sep 13, 2021 9:16 am
Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Outperformed "peer group averages"
Their email to me said: “ Vanguard Core-Plus Bond Fund aims to outperform the fund's benchmark* and provide broad diversification to help reduce portfolio volatility.” They cited Barclay’s Agg Index as the one they intend to outperform.

I don’t really have a huge problem with this as I don’t believe in indexing in bonds in quite the same way as stocks, buts it is still potentially indicative of a shift at Vanguard that is worth paying attention to. Not scared yet as they still appear fully committed to low cost approaches.
**Edited: Vanguard is not using the AGG Index. They will use a different Barclay index. Thanks to retired@50.**


This is too sleazy. They should be using a core plus index as the benchmark. AGG has no junk bonds.

This reminds me of Edward Jones' tactic of benchmarking their growth funds against SPY and then crow they are beating their benchmark while underperforming other growth indexes.
Last edited by MishkaWorries on Mon Sep 13, 2021 10:58 am, edited 2 times in total.
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Re: Well this is Disturbing

Post by DVMResident »

Remember, the problem with actively managed funds is not that they're actively managed.
The problem with actively managed fund is that they're expensive.

Vanguard has some of the lowest-cost actively managed funds: Wellington ER 0.24%, STAR ER 0.31%, Windsor ER 0.29%, etc. Vanguard's core value proposition is not indexes, but rather that they're cheap. Vanguard's active MF ERs are less than indexes at many other companies.

While I don't invest in actively managed funds, many investors have been well served by Vanguard's actively managed funds for decades.
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Re: Well this is Disturbing

Post by tibbitts »

wilked wrote: Mon Sep 13, 2021 9:25 am suggest a better more focused title...
Yes please.
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Re: Well this is Disturbing

Post by retiringwhen »

Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Sigh, this is nothing new. My first fund purchased at Vanguard was the Vanguard Windsor Fund in 1987. The Wellington Fund has been around since 1929. They both are actively managed funds touting the desire to outperform their benchmark.

Many people do not realize, but Vanguard has nearly the largest AUM for Active Funds in the industry.
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Re: Well this is Disturbing

Post by retired@50 »

MishkaWorries wrote: Mon Sep 13, 2021 9:35 am
9-5 Suited wrote: Mon Sep 13, 2021 9:23 am
pizzy wrote: Mon Sep 13, 2021 9:16 am
Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Outperformed "peer group averages"
Their email to me said: “ Vanguard Core-Plus Bond Fund aims to outperform the fund's benchmark* and provide broad diversification to help reduce portfolio volatility.” They cited Barclay’s Agg Index as the one they intend to outperform. <-- FALSE See below.

I don’t really have a huge problem with this as I don’t believe in indexing in bonds in quite the same way as stocks, buts it is still potentially indicative of a shift at Vanguard that is worth paying attention to. Not scared yet as they still appear fully committed to low cost approaches.
... They should be using a core plus index as the benchmark. AGG has no junk bonds.
There are two different funds at Vanguard with the word "Core" in them. One of them, "Core Plus" isn't actually available yet. See link below.

According to the webpage linked below, about the "Core-Plus" Fund
The fund will strive to outperform Bloomberg Barclays U.S. Universal Total Return Index.
Source: https://investornews.vanguard/coming-so ... bond-fund/

The "Core" Fund (VCORX) uses the "Agg" index as a benchmark.
Source: https://investor.vanguard.com/mutual-fu ... olio/vcorx

Regards,
Last edited by retired@50 on Mon Sep 13, 2021 10:19 am, edited 1 time in total.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by LadyGeek »

tibbitts wrote: Mon Sep 13, 2021 9:48 am
wilked wrote: Mon Sep 13, 2021 9:25 am suggest a better more focused title...
Yes please.
I retitled the thread. (Thanks to the member who reported the post and explained what's wrong.)
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by Triple digit golfer »

I don't think it's disturbing. It's not going to change a thing for those of us who hold Vanguard index funds.
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Re: Well this is Disturbing

Post by tibbitts »

MishkaWorries wrote: Mon Sep 13, 2021 9:35 am
This reminds me of Edward Jones' tactic of benchmarking their growth funds against SPY and then crow they are beating their benchmark while underperforming other growth indexes.
TRP was guilty of the same inappropriate benchmark selection when I owned their active funds in my employer during the tech runup during the late 1990s, and their "growth at a reasonable price" strategy was losing to "growth at a wildly inappropriate price." I don't remember the specifics but it was worse than using an investment-grade index as a benchmark for a core bond fund, although that would also seriously off the mark.

Edited to reflect that Vanguard seems to be using an appropriate benchmark for the Core Plus fund.
Last edited by tibbitts on Mon Sep 13, 2021 10:21 am, edited 1 time in total.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by tibbitts »

Triple digit golfer wrote: Mon Sep 13, 2021 9:52 am I don't think it's disturbing. It's not going to change a thing for those of us who hold Vanguard index funds.
Not only not disturbing - not even surprising.
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Re: Well this is Disturbing

Post by retired@50 »

tibbitts wrote: Mon Sep 13, 2021 9:58 am TRP was guilty of the same inappropriate benchmark selection
This is not what's happening. See my post above.

Regards,
This is one person's opinion. Nothing more.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by greg24 »

SOP for the current incarnation of Vanguard.
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Re: Well this is Disturbing

Post by Kenkat »

DVMResident wrote: Mon Sep 13, 2021 9:41 am Remember, the problem with actively managed funds is not that they're actively managed.
The problem with actively managed fund is that they're expensive.

Vanguard has some of the lowest-cost actively managed funds: Wellington ER 0.24%, STAR ER 0.31%, Windsor ER 0.29%, etc. Vanguard's core value proposition is not indexes, but rather that they're cheap. Vanguard's active MF ERs are less than indexes at many other companies.

While I don't invest in actively managed funds, many investors have been well served by Vanguard's actively managed funds for decades.
There are a surprising number of people who don’t get this.
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Re: Well this is Disturbing

Post by jeffyscott »

DVMResident wrote: Mon Sep 13, 2021 9:41 am Remember, the problem with actively managed funds is not that they're actively managed.
The problem with actively managed fund is that they're expensive.

Vanguard has some of the lowest-cost actively managed funds: Wellington ER 0.24%, STAR ER 0.31%, Windsor ER 0.29%, etc. Vanguard's core value proposition is not indexes, but rather that they're cheap.
Yes and even cheaper when Admiral shares are available and you can put the required $50K in. Wellington Admiral ER is 0.16%, Windsor's is 0.19%.
The two greatest enemies of the equity fund investor are expenses and emotions. ― John C. Bogle
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Re: Well this is Disturbing

Post by tibbitts »

retired@50 wrote: Mon Sep 13, 2021 10:02 am
tibbitts wrote: Mon Sep 13, 2021 9:58 am TRP was guilty of the same inappropriate benchmark selection
This is not what's happening. See my post above.

Regards,
Sorry I missed your post, and of course you're correct. I had never heard of Bloomberg Barclays U.S. Universal Total Return Index, but it seems very appropriate.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by aristotelian »

I've been getting a lot of marketing emails for their asset management services too.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by CyclingDuo »

Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
We've been using Vanguard's actively managed International Growth Fund for 32 years.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by bengal22 »

greg24 wrote: Mon Sep 13, 2021 10:11 am SOP for the current incarnation of Vanguard.
Same Old Poppycock?
Sleazy Outdated Protocol?
Standard Operating Procedure?
Start of Progress?
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by GaryA505 »

Vanguard serves people who like index funds as well as those who like active funds. It's not disturbing to me. I use both.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by sycamore »

greg24 wrote: Mon Sep 13, 2021 10:11 am SOP for the current incarnation of Vanguard.
Vanguard has long been open minded -- perhaps of two minds? -- about using both indexing and active funds. On the wayback machine, the oldest archive of vanguard.com is June 13, 1997. One page, Online Bulletin: Five Myths About Indexing says (emphasis mine):
While we've attempted to clear up certain misconceptions surrounding indexing, we should emphasize that indexing is not a panacea. We advocate the approach for the "core" portion of an investor's portfolio -- say, 50-60% of assets should be indexed. With the remaining assets, investors may then choose actively managed funds that they believe have potential to provide superior investment performance over the long run benchmarks. Core investing assures that a significant portion of an investment program will essentially match the market, while providing the opportunity to seek market-beating performance with the remainder.
But another page from then-Chairman Jack Bogle himself, The Implications of Style Analysis on Mutual Fund Performance Evaluation, discusses Morningstar's style box, and whether to use active versus indexing for a given style. Notice the last parenthetical remark (emphasis mine):
Turning to the stock market, if you believe it is efficient (and you are right) . . . the best strategy is to buy an index fund. If you believe it is efficient (and you are wrong) . . . you will earn the market’s return but a few actively managed funds will beat you. But if you bet that the market is not efficient, the probability of underperforming is high. The risk, in short, is much greater if you bet on inefficiency rather than on efficiency. And that is ultimately the conclusion of equity style analysis in the mutual fund industry: no matter what fund style you seek, emphasize the low-cost funds, eschew the high-cost funds. And, if you want the best bet of all, you should consider indexing in the Category Rating box in which you seek style representation in your portfolio. (A simpler course, to be sure, is to index your entire portfolio, with the S&P 500 Index or--probably a more conservative wager--with a total stock market index.)
So from Vanguard there's one message that it's okay to use a mix of index & active investing, and another message that the "best bet of all" and "simpler course" is to index my entire portfolio.

I recall mixed messages like this from Vanguard for decades now. FWIW, I don't consider it a problem either.
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Re: Well this is Disturbing

Post by MishkaWorries »

retired@50 wrote: Mon Sep 13, 2021 9:49 am
MishkaWorries wrote: Mon Sep 13, 2021 9:35 am
9-5 Suited wrote: Mon Sep 13, 2021 9:23 am
pizzy wrote: Mon Sep 13, 2021 9:16 am
Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Outperformed "peer group averages"
Their email to me said: “ Vanguard Core-Plus Bond Fund aims to outperform the fund's benchmark* and provide broad diversification to help reduce portfolio volatility.” They cited Barclay’s Agg Index as the one they intend to outperform. <-- FALSE See below.

I don’t really have a huge problem with this as I don’t believe in indexing in bonds in quite the same way as stocks, buts it is still potentially indicative of a shift at Vanguard that is worth paying attention to. Not scared yet as they still appear fully committed to low cost approaches.
... They should be using a core plus index as the benchmark. AGG has no junk bonds.
There are two different funds at Vanguard with the word "Core" in them. One of them, "Core Plus" isn't actually available yet. See link below.

According to the webpage linked below, about the "Core-Plus" Fund
The fund will strive to outperform Bloomberg Barclays U.S. Universal Total Return Index.
Source: https://investornews.vanguard/coming-so ... bond-fund/

The "Core" Fund (VCORX) uses the "Agg" index as a benchmark.
Source: https://investor.vanguard.com/mutual-fu ... olio/vcorx

Regards,
Good! I'm glad Vanguard isn't playing that game.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by secondopinion »

Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
Not any worse than most active management companies; they want to increase profits. In my mind, they want to take in the active management crowd; and the profits will go to the index fund holders partially because of Vanguard's structure (and they might get the 0% ER funds or even ETFs).

As long as they secure new business, it is positive, not negative, for Vanguard indexers.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by nisiprius »

A pity that Vanguard didn't offer a Barclay's US Universal Bond Index product. Although I don't care personally, because I prefer to invest my bond allocation entirely in investment-grade bonds.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by Buddtholomew »

So if they’re actively managed funds with Vanguard then it’s quite alright, but with another institution it’s blasphemy to Boglehead philosophy.

Also, pushing active management increases investor expenses and therefore VG revenue. In other words it’s lucrative. What happened to low expenses? All of a sudden, managers produce alpha and can beat their indexes.

I too have held actively managed VWILX for 10+ years and am more than pleased with its performance. I chose the active fund because it was the only 401K International offering.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by 40 Years' Gatherin's »

Just ignore this noise from Vanguard. All you need is VTSAX or VFIAX. You don't even need bonds, unless you're rich and/or under 60.
Again, VTSAX or VFIAX. That is all.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by Dale_G »

It looks like IShares Core Total USD Bond ETF IUSB tracks the Bloomberg US Universal Index. The e.r. is .06%.

I am perfectly happy with the Vanguard actively managed bond funds that I presently own. I am not excited about the initial .2% e.r. of the new Vanguard Core Plus fund, but I expect the e.r. will come down in time. I am likely to recommend the Core Plus as a replacement for Total Bond Market to a few accounts that I informally advise, and do not otherwise have any exposure to EM or junk bonds.

Dale
Last edited by Dale_G on Mon Sep 13, 2021 9:13 pm, edited 1 time in total.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by retiringwhen »

Vanguard has the lowest ER for Active funds in the industry across the board. Additionally, their funds generally perform decently and seldom find themselves in the bottom quintile (mostly because of low costs).

If you are going to do active, Vanguard is the place to be in my opinion.

I learned my lesson with the American Century Funds in the 1990s and T Rowe Price too. I consolidated at Vanguard and was very happy with my active funds (mostly PRIMECAP, Windsor, Strategic Equity, Explorer and International Growth) until I decided to simplify in 2017 to a 100% passive portfolio.

BTW, my original portfolio was modeled after an approach with a mix of Index and Active funds that was suggested by none other than Jack Bogle in chapter 12 "Allocation of Investment Assets" of his first book "Bogle on Mutual Funds" published in 1993.

My 2017 portfolio was also suggested in the same book and same chapter :-) As Rick Ferri has pointed out with his 4 stages of an enlightened investor, it can take time to see the wisdom of simplicity.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by tibbitts »

40 Years' Gatherin's wrote: Mon Sep 13, 2021 9:01 pm Just ignore this noise from Vanguard. All you need is VTSAX or VFIAX. You don't even need bonds, unless you're rich and/or under 60.
Again, VTSAX or VFIAX. That is all.
Although you can make an argument that you don't need bonds, I don't think you'll find as much support for not needing any fixed income.
More support than a few years ago, but still not much. In particular I haven't heard your only-needing-bonds-under-60 theory before.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by tibbitts »

Buddtholomew wrote: Mon Sep 13, 2021 8:42 pm So if they’re actively managed funds with Vanguard then it’s quite alright, but with another institution it’s blasphemy to Boglehead philosophy.

Also, pushing active management increases investor expenses and therefore VG revenue. In other words it’s lucrative. What happened to low expenses? All of a sudden, managers produce alpha and can beat their indexes.

I too have held actively managed VWILX for 10+ years and am more than pleased with its performance. I chose the active fund because it was the only 401K International offering.
I believe this is mostly about expenses, so it's only more "okay" to use Vanguard active due to the lower expenses.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by 40 Years' Gatherin's »

tibbitts wrote: Mon Sep 13, 2021 9:12 pm
40 Years' Gatherin's wrote: Mon Sep 13, 2021 9:01 pm Just ignore this noise from Vanguard. All you need is VTSAX or VFIAX. You don't even need bonds, unless you're rich and/or under 60.
Again, VTSAX or VFIAX. That is all.
Although you can make an argument that you don't need bonds, I don't think you'll find as much support for not needing any fixed income.
More support than a few years ago, but still not much. In particular I haven't heard your only-needing-bonds-under-60 theory before.
Cash is my preferred fixed income these days.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by roth evangelist »

I don't get it. Just don't invest in their active funds. They aren't doing away with their index funds.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by Dale_G »

roth evangelist wrote: Mon Sep 13, 2021 10:14 pm I don't get it. Just don't invest in their active funds. They aren't doing away with their index funds.
So if someday you feel you want to own municipal bond funds and don't want active, I guess you have to go elsewhere. Most of Vanguard's bond bunds, municipals and otherwise are actively managed.

Cap weighted equity indices make total sense, bond indices are more for reference.

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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by roth evangelist »

Dale_G wrote: Mon Sep 13, 2021 11:40 pm
roth evangelist wrote: Mon Sep 13, 2021 10:14 pm I don't get it. Just don't invest in their active funds. They aren't doing away with their index funds.
So if someday you feel you want to own municipal bond funds and don't want active, I guess you have to go elsewhere. Most of Vanguard's bond bunds, municipals and otherwise are actively managed.

Cap weighted equity indices make total sense, bond indices are more for reference.

Dale
Vanguard has VTEB or its mutual fund equivalent VTEAX. They have plenty of bond index funds that aren't going away.
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Re: Well this is Disturbing [Vanguard pushing actively managed funds]

Post by typical.investor »

Buddtholomew wrote: Mon Sep 13, 2021 9:12 am https://investor.vanguard.com/mutual-f ... ly-managed

Vanguard pushing Active management and touting funds have outperformed their benchmark.
To be honest, price discovery has to happen someplace. Why not some of it at Vanguard? They probably are better at it than many!!!!
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