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Vanguard Microsite Fetes 35 Years of Index Funds


After four decades of steady growth, the Vanguard Group is now the nation's largest fund company, with $1.6 trillion under management. Its three core strengths: a solid reputation for putting investors first, its emphasis on giving broad exposure to the stock market through index funds and its low fees.

Now, Vanguard hopes to keep its crown-and build on it-with a microsite celebrating 35 years of indexing, said Amy Chain, a public relations associate at Vanguard.

The microsite underscores and reiterates Vanguard's three core strengths-reputation, diversification and low cost-in very simple language, aimed at reaching a larger base of customers.

And in its simplicity, the microsite uses commonsense thinking and touches of humor.

"With indexing growing in popularity, and in recognition of these important milestones, we unveiled a new indexing site in May, Vanguard.com/index, to help educate investors on the strategy's merits, history and continued evolution," Chain told Money Management Executive.

The site, 'Indexing-35 Years of Getting More of the Markets for Less,' will serve as a hub for Vanguard's thinking on topics related to indexing, Chain said. The site will feature videos, articles and other content featuring perspectives from experts such Vanguard Managing Director and Chief Investment Officer Gus Sauter as well as economist and author Burton Malkiel, known best for his book, "A Random Walk Down Wall Street," which popularized efficient-market theory.

The site also will try to help investors understand how to use indexing in their investment portfolios, the history of indexing and Vanguard's role in it.

Visitors can comment on the postings, e-mail them to friends or business contacts and repost them on social media sites, such as Facebook or Twitter.

The microsite arrives 35 years after the group launched the nation's first index mutual fund, the Vanguard 500 Index Fund, in 1976. The nation's first bond index fund, the Vanguard Total Bond Market Index Fund, launched 25 years ago in 1986, Chain also noted. Vanguard then expanded on these funds with international index funds in the 1990s and exchange-traded funds in the 2000s.

Vanguard is promoting this new microsite and any special events associated with it on the home page of its main site, www.vanguard.com.

Recently, for example, Vanguard posted a link on that page to video clips from a May 10 roundtable webcast devoted to the merits of indexing. Appearing at the roundtable were Sauter, personal finance columnist Jane Bryant Quinn and Morningstar Research Director John Rekenthaler.

The webcast attracted more than 3,000 attendees, and Vanguard expects this level of participation and interest in the microsite to build, Chain said.

Although the microsite concentrates on the simplicity and the basics of indexing, Vanguard attempts to present these fundamentals as giving individual investors a powerful way to participate in the markets. Vanguard also tries to inspire investors to become excited about and committed to making index funds the core of their portfolios.

At the landing page, for instance, the fund giant proudly exclaims: "In 1976, Vanguard launched a revolution with the first index mutual fund for individual investors. We're still leading the way 35 years later."

This proclamation then directs viewers to an introductory video that aims to make a case for the timeless relevance of indexing. In the video, a spokesman clicks a light bulb on and says: "New ideas seem to go through the same cycle. First, there's resistance. Sometimes even laughter. But, if, on the whole, the new idea helps you do something less expensively or more efficiently, it eventually catches on. So it is with the index fund."

The spokesman, with a slight smile, then shares some of the early reviews the Vanguard Index Fund: "Long-term mediocrity." "A cop-out." "Un-American."

He then shunts those derisions aside by noting, "Today, hundreds of billions of dollars are invested in index and exchange-traded funds. Nobody is scoffing."

Sauter then appears in the video to emphasize the point: "Indexing does not have the high cost of active management, so the expense ratios are very low. And because of that, an index portfolio could provide a rate of return very close to the market rate of return."

In another video, "Is Indexing Right for You?," Vanguard Principal Catherine Gordon talks about index funds' goal of delivering the returns of an underlying benchmark index-and once again reiterates the dual benefits of diversification and low cost.

Gordon then talksl about the high turnover in many actively managed funds. This leads to higher costs, which means lower returns for investors, she explains.

There are other benefits to index funds, Gordon continues. "Less turnover also means less guesswork, since you'll have a good idea of which securities the fund contains," Gordon says. "And less guesswork just might mean you can spend less time choosing a fund and more time tending your garden or watching the ballgame."