Mutual fund snapshots

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Mutual Fund Snapshots

Vanguard Group

by Tony Novak, CPA, MBA, MT
, revised 11/30/2011

Vanguard Group is the largest mutual fund company. Most of the firm’s investment assets are in automated index funds rather than portfolios that are actively managed. Vanguard has the lowest operating costs in the industry and is a great choice for those who want to match the market for the long term. Shares can be purchased directly from Vanguard or through a non-commissioned financial adviser who is contracted as an investment adviser with Vanguard. Some trust companies now have arrangements to offer Vanguard funds to their clients (see the recent announcements, for example).

American Funds

The fastest growing mutual fund company is American Funds. American Funds have attracted more new investment dollars than any other mutual fund company for each of the past consecutive 18 months through Oct. 2004. The funds are primarily distributed by brokers that are paid a commission, but the shares are also available at no-load for clients of non-commissioned financial advisers. Shares are not offered directly to the public. These funds are a good choice for investors with specific defined needs who are working with either a traditional commission-based or fee-only financial adviser.

Investors will likely find outstanding value with either firm. Both firms provide outstanding service and offer a great wealth of resources. American Funds requires that investors work with an appropriately registered accountant, adviser or broker. Vanguard accepts money directly from investors. This direct purchase approach is easier and less expensive but may be more likely to result in misunderstandings about investments and suitability for specific financial goals because there tends to be less communication with a parson who personally relates to the individual investor. Mutual fund shares are typically purchased by telephone after an account is opened with a mailed check (although other account options are available).

Exchange Traded Funds

Another more attractive option for mutual fund investors with larger account balances are exchange-traded funds. The details of exchange traded funds are not discussed in this article, but investors should be aware of the advantages of this option. It would be silly for most serious investors not to take advantage of this new type of fund shares.

Status: available for reprint; some comments are outdated but do not materially impact the article

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