Investors have grown ever more cost conscious over the years, especially since the 2008 crisis. Vanguard established itself based on that characteristic of investors and, 40 years later, its success has only accelerated.
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The first four months of 2012 have given particular witness to that growth. Vanguard funds have attracted a full one third of all investment dollars flowing into mutual funds and exchange traded funds (ETFs) since the beginning of the year.
Those flows also show that investors are not tired of traditional asset classes—stocks and bonds—despite the scramble by other firms to create offerings in alternative investments. Investors in the firm’s mutual funds are also owners of the firm, a characteristic that has helped the firm keep costs contained.
There is less drag on returns when transaction costs and management fees are low.
Fee-based investing and a tendency to use index investing as a core strategy have benefited the firm. However, as the markets reflect continued economic improvement, investors may migrate back to actively managed funds.