Vanguard looks ahead into 2019
What do investors expect in from Vanguard in 2019?
Two outstanding wishes: better technology and more of the deeply researched investment and economic research for which the Malvern, Chester County investment company is wellregarded.
We point readers to Vanguard's outlook for 2019, available on the Vanguard website, as well as Vanguard Chief Investment Officer Greg Davis' expectations on interest rates and blockchain, the disruptive digital record-keeping technology underlying cryptocurrencies such as bitcoin.
Interestingly, Vanguard CEO Tim Buckley told CNBC recently that he expects a balanced portfolio will return about 5 percent annually in the coming years.
Vanguard CIO Greg Davis predicted globally diversified stocks will earn between 4.5 and 6.5 percent annually and global bonds will generate returns of 2.2 to 4.2 percent.
Meanwhile, Vanguard founder Jack Bogle expects stocks to earn 4 percent over the next decade and bonds 3.5 percent.
Bogle doesn't believe in investing overseas, so it's no surprise he projects lower returns at home than Buckley and Davis think they'll earn in foreign markets.
As my colleague Joe DiStefano wrote recently, Bogle has just published “Stay the Course,” his 12th book, in which he retells familiar Vanguard stories and industry questions with some new detail.
The emphasis is again on low fees, market-index targets, clarity and structural exceptionalism. (The company is owned by its funds, not its founders or outside shareholders. Bogle says that's key, while acknowledging not quite everyone agrees.)
Vanguard Personal Advisor Services issued a fascinating chart at the end of December, pointing out that government shutdowns often trigger volatility and market sell-offs, but those rarely last.
Vanguard in 2018 also again cut costs for nearly 1.5 million clients in its low-cost Admiral Shares, dropping minimum investment requirements from $10,000 to $3,000 for 38 index funds.
What investors want less of from Vanguard?
Bizarre technology outages and notifications like yet another the other week.
Vanguard emailed some customers just before Christmas, blaming a “technical error” related to dividend distributions.
A number of bond funds paid out small capital gains on Dec. 21 and should have been reinvested the same day. The transactions should have shown up in online accounts right away.
Instead, Vanguard says it won't be processing the transactions until the day after Christmas or perhaps even a week late. “That's not to say that they won't be reinvested at the closing price on the 21st, but just that Vanguard couldn't process them for almost a week,” said “Independent Adviser for Vanguard Investors” newsletter writer Dan Wiener in a note to his clients.
Vanguard devotees, affectionately named the “Bogleheads” after the founder's low-cost investment philosophy, soured on the news, which prompted the $5 trillion mutual fund firm to post a response on the Bogleheads website.
“With Vanguard being closed for the weekend, I wanted to respond and assure you that we are aware of the problem that affected some of our bond fund dividend payments and are working to rectify it,” wrote Vanguard's Rebecca Katz. “I'm sorry we caused you concern, but rest assured, we'll fix it, and keep you posted.”