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Vanguard ‘Dime Grandma’ After 49 Years of Unwanted Fees
In the fee-laden world of money management, Vanguard Group has long enjoyed a reputation for being spot-on.
When Jack Bogle founded Vanguard almost 50 years ago, the idea was to create a company owned by its investors – aligning the incentives of the company and customers. This unique model, unlike shareholder-owned companies like Schwab and Fidelity, has led Vanguard to constantly look for ways to reduce fees, leading to rock-bottom-fee index funds, low fees for actively managed funds, and a general lack of fees. extravagant or hidden.
“If ever a statue is erected to honor the person who has done the most for American investors, the immediate choice should be Jack Bogle,” wrote Warren Buffett in his 2016 letter to Berkshire Hathaway shareholders. “He has helped millions of investors get much better returns on their savings than they would have otherwise…he is a hero to them and to me.”
But the company, founded in May 1975, may be trying to trade some of its hard-earned goodwill for the most banal of asset management vices: extravagant fees, including one that a longtime Vanguard observer calls “granny cheap.” ”. These are developments that, when considered in conjunction with Jack Bogle’s legacy, seem unusual and un-Bogle-like.
Let me walk you through some of these changes, which will affect millions of customers, explain what’s happening, and present Vanguard’s vision.
Selling Retirement Accounts
First, Vanguard decided to sell many (I won’t say how many) small business retirement accounts, including one of mine, to a company called Ascensus. This company will impose fees on investors like me who do not currently pay fees to Vanguard. The accounts Vanguard is selling include individual 401(k)s, SIMPLE IRAs and multi-participant SEP-IRAs.
Vanguard said it saw that “the needs of many small business owners have evolved” as it evaluated its offerings, and calls Ascensus “a leading provider of tax-advantaged savings and retirement solutions deeply committed to meeting the unique needs of small business retirement.” plans.”
But from where I sit — and I’m sure I’m not alone — I’m going to go from having an individual 401(k) that I pay no fees for to a company that will charge me at least $40 a year in fees, and possibly more.
Vanguard group founder John Bogle makes the point during an interview in his office on the Vanguard campus near Valley Forge, Pennsylvania, on January 16, 2003. Bogle, an industry guru, has publicly criticized the mutual fund industry . (Reuters) (Reuters)
Interestingly, Vanguard is not selling its individual IRA business to Ascensus. Vanguard says this is because it has many individual IRAs and therefore benefits from economies of scale. While selling the relatively few individual 401(k)s it manages, Vanguard says, will keep costs low for the clients it retains.
The story continues
So why am I not converting my individual 401(k) to an individual IRA and suggesting that other affected Vanguard investors do the same? Because contributions to an individual’s 401(k) are generally deductible for local income tax purposes, but in some states – including mine – contributions to individual IRAs are not deductible.
This means that if individual 401(k) holders stay with Ascensus – I’m not sure what I will do – they will be hit with costs they had no way of predicting when they opened and maintained their Vanguard accounts.
A tax on the elderly?
Then there is the $25 fee that Vanguard will impose on people who have less than $1 million in Vanguard funds and buy or sell Vanguard funds by calling Vanguard telephone representatives rather than trading online.
“It appears that the only people who will pay this $25 fee will be retirees who have been lifelong Vanguard investors but are not comfortable with the Internet,” says Jeff DeMaso, whose Independent Vanguard Adviser newsletter does not part of the Vanguard empire. That’s why DeMaso calls this tax “grandma cheap,” which strikes me as accurate, funny, and sad.
Vanguard says the vast majority of trading in its funds is done online and that charging a fee to some people who trade by phone will reduce costs for everyone else.
This may be the cooperative mentality, but it feels like tyranny of the majority. Considering that at least some people who have had Vanguard accounts for years are not ready to trade electronically, this charge seems wrong.
Such as the fact that Vanguard is willing to absorb the costs of people who have at least $1 million of Vanguard funds who trade by phone, but not the costs of people who have less than $1 million.
A new dividend rate
Then there’s another tacky charge: a new 1% fee on dividends received by Vanguard customers who hold foreign securities and American Depositary Receipts. This fee will only cost me about $4 a year and will be indirectly tax deductible, reducing my taxable dividend income, but it still seems tacky to me.
Vanguard said: “The fee helps offset operating costs associated with foreign securities and ADRs.” But it won’t provide numbers on those costs or how many people the fee will affect.
The $100 Kick on Exit
Finally, there’s the new $100 fee that Vanguard may (or may not) charge people who hold less than $5 million in Vanguard funds and transfer accounts to other brokerages. Vanguard says the fee “helps offset the costs of transferring assets.” It is another example of imposing costs on small investors, but not on larger ones. It doesn’t feel right.
In fact, Vanguard’s competitive situation has changed in the 49 years since Bogle launched the company. Back then, Wall Street scoffed at retail index funds. Now, index funds have become a huge segment of the market and some competitors are charging tiny fees that are competitive with Vanguard’s.
Obviously, Vanguard has to change with the times – but the changes I’ve discussed here seem incongruous with the company’s legacy.
I can’t ask Bogle, who passed away in 2019, what he thought about what’s happening at the company he founded. But for a company that Say your mission is “taking a stand for all investors, treating them fairly and giving them the best opportunity for investment success”, these new accusations certainly seem inappropriate.
Allan Sloan is an award-winning financial journalist and contributor to Yahoo Finance.
Read the latest financial and business news from Yahoo Finance
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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