Rich Snail

First time here? You may want to read more about Rich Snail or even receive regular updates via a RSS feed reader or by email. Good read!

Funds are my favorite way of building a diversified portfolio. Many people are afraid of funds ’cause they do not know how they work or what their strategy is. There also are so many it becomes a pain to make a choice. In this category I will review will be the ones I personally like and recommend; hoping to convince a few recalcitrant and help others cherry pick their funds. Good read!

The Vanguard 500 index fund (code:VFINX) is, as its name indicates, an Index Funds tracking the Standard & Poor’s 500 index. It was launched in 1976 and has since been a portfolio’s favorite of many investors. Its success boils down to its investment philosophies - and some say its very good customer services.

Vanguard 500 Philosophy

John Bogle, Vanguard founder, built his company and index fund based on his Princeton undergraduate thesis findings. Mr. Bogle used the Standard & Poor’s 500 index to compare the performance of mutual funds in the past. He soon realized that three out of four of the managers were not performing better than a passive investor holding a basket of the 500 largest public companies in America. Their performance were eventually below par as investors still needed to pay their expenses, and active trading incurred taxes.

Mr. Bogle then decided to create a fund following the S&P’s 500 index with extremely low expenses. They achieved those low expenses thanks to a no-load strategy - the buyer do not pays sales commission (also called “load”) when buying or selling fund shares. All this no-load explanation may sound a little complicated. It simply translates into an incredibly low 0.18% expense ratio. Thanks to this sane and sound strategy, the Vanguard 500 Index Fund has grown to become one of the largest mutual funds of any kind. It now has more than $100 billion in assets - and growing!

What does this means to you?

It simply means that the Vanguard 500 is to be present in your portfolio. It is a very safe, cheap, and rewarding fund to hold - for Americans and non-Americans alike. Some may be afraid to invest in American funds right now. They may be right should you consider a lump sum investment. But for those considering cost-averaging, then now is the time to start building your position. What are you waiting for?

Vanguard 500 Market Data
Yahoo Finance
MSN Money
Google Finance