Vanguard funds (also known as Vanguard index funds because the first index fund was called the Vanguard 500 Index Fund) are a type of vehicle that has been replicated by a large number of investors from different parts of the world.
In addition, it is estimated that currently the firm already moves around $50 billion worldwide.
If you want to invest in them, it is important that you know everything about it. In this article we answer the most common doubts:
What is Vanguard?
Vanguard is a management company dedicated to investment funds, focusing on passive management (in ETFs or exchange-traded funds and index funds).
One of the defining characteristics of the entity is that we are not talking about a listed entity, as is the case with other related companies operating in the same sector.
Vanguard is only dedicated to the management of capital, so it could be said that the company itself is owned by the investors that compose it.
One of its most important competitors is BlackRock. Both are trying to consolidate their position at the top in terms of assets under management.
There are 3 traits that give Vanguard its identity:
- Diversification of investment resources.
- Reduction of costs to the minimum possible.
- Investment with a long-term return perspective.
What are the advantages of Vanguard funds?
You will discover the real interest of this type of investment by getting to know its main advantages.
As soon as you have made your investment, you will start to generate income.
It is possible to invest in different types of funds. If you manage to diversify your investment, it will be easier to maximize your profits.
2. Reduced fees
Vanguard funds have very low fees associated with them.
In addition, it should be noted that the management of operations is carried out through automated algorithms that only replicate indexes. For this reason, it is not necessary to make too many transactions and this means that the commissions do not skyrocket.
3. Minimum investment time
You must take into account that the investment in these funds is long term. This means that you will not need to check them every day to know how things are going.
If you do it on your own, it will be enough to review them once every 3 months approximately.
If you leave it in the hands of an automated manager, he will make all the necessary adjustments.
4. No financial knowledge is required
One of the most interesting advantagesof Vanguard funds is that they do not require financial literacy. However, it is always interesting to gather as much information as possible, as this will give you a certain advantage when making each investment.
In any case, these funds are adapted to your level. As you become more specialized in more technical subjects you will see how your performance starts to wake up.
And it will be even easier if you use a robo advisor.
As it happens in any other type of investment, it will always be necessary to study if there are disadvantages to consider.
The most singular disadvantage is thatthis investment method does not allow you to obtain a quick return. Investments will always be medium or long term. For example, it could not happen that you buy a certain stock and it skyrockets from one day to the next.
Furthermore, while diversification can broaden your investment, it is a double-edged sword. If the markets go down, your investment will follow suit.
How to start investing in Vanguard funds?
We have two ways to invest in Vanguard Funds:
We can make the investment at our own risk. To do this, we will have to research to find a broker that suits our needs and choose the funds that are most interesting.
Among the options we find in the market, the most interesting brokers are: MyInvestor, Zona Value and GPM Broker.
Our recommendation is to invest in these funds automatically, especially if you are just starting out and/or cannot devote too much time to them.
To do so, just follow these steps:
- Select a robo advisor that meets your expectations.
- Complete the test to find out which investor profile is yours.
- Choose the portfolio you are interested in (you can change it later).
- Enter the minimum amountof money to be able to start. This amount will depend on each type of broker, but usually ranges between 1000 and 3000€.
If you want the whole process to be handled automatically, you can also schedule an automated transfer from the bank so that funds arrive on a certain day of the month.
Here are the basics you need to know to invest in Vanguard funds.