The Vanguard moment!

Reimaging MF industry with passive Investing!

Today is pivotal day for Indian investors, especially the passive investor community! Former Flipkart co-founder Sachin Bansal’s NaviMutual Fund has filed for a ‘Total US Stock Market’ Fund of Funds (FoF) with Sebi and bootstrapped discount broker Zerodha gets in-principle approval to launch mutual fund.

Neil Borate @ActusDei

Vanguard has finally come to Indian investors. #Navi Mutual Fund has filed with Sebi for an FoF feeding into Vanguard Total Stock Market Index Fund. Here is the beauty. Vanguard expense ratio is 0.04% which under Sebi rules caps the combined FoF ratio to just 0.12%. #mutualfunds

Nithin Kamath @Nithin0dha

So, we just got our in-principle approval for our AMC (MF) license. I guess now comes the hard part.

Nithin Kamath @Nithin0dha

To grow the capital market participation from the current 1.5 crores and address those who currently don't invest (Millenials), we think mutual fund as a product needs to be reimagined. So yeah, we have just applied for an AMC (Mutual fund) license. 🤞 https://t.co/jBuH1722n5

Although Navi has plans to feed into Vanguard currently (Vanguard, founded by John Bogle, is a pioneer in passive investing in the US and the second-largest money manager after Blackrock) .  Both can potentially become Vanguards of India in terms of passive investing!

Incidentally almost the same day in 1976, Vanguard launched the first index mutual fund - Vanguard 500 Index Fund. It was founded by John C. Bogle, on a simple but revolutionary idea - that its shareholders would be the owners. Today, Vanguard has assets of over $7.5 trillion!

I need not reinvent the wheel in terms introducing more about pioneer of passive investing , IndexHeads India has a great write-up on Lessons from a true investing superhero, John C Bogle. Do check-out!

Simplicity has a majesty. Time is your friend, impulse is your enemy. Cost matters. These things seem simple, and they are."- John Bogle

So what’s the big deal about cost? Yes, cost matters, the devil is in the details. Bogle was a great believer in Cost Matters Hypothesis (yet another great write-up by IndexHeads India) Investors overtime would prefer low cost funds ie.,reduced expense ratios.

India ETFs & Index Funds @IndiaEtfs

Expense ratios of actively managed equity schemes. 1.5%-2.1%, compare this with index funds' expense ratios 0.1-0.5% The lower the expense, the better it is for your fund as expenses reduce the fund returns to that extent. Costs do matter! via @livemint #indexfunds

For example in the Navi Mutual Funds scenario, Vanguard expense ratio is 0.04% which under Sebi rules caps the combined FoF ratio to just 0.12%. This is indeed a big deal for investors, as it saves a lot in terms of fee expenditure. Vanguards asset-weighted average expense ratio was 0.09% in 2020. The industry's corresponding average (excluding Vanguard) was 0.54%, a savings of 83% for Vanguard investors!

ContrarianEPS @contrarianEPS

Hallmark of how Investment management company must work. Expense ratio is lowered every year. Also after it’s costs, the profits earned are distributed back to its unit holders. Atleast one can try to be closer if not become Vanguard https://t.co/mkrI16Gjwp

Ritholtz Wealth @RitholtzWealth

Today in market history, 1975: With only three people employed in the company, The Vanguard Group begins operations. Today, Vanguard manages $5.1 trillion.

It would be interesting to see how much the potential new Vanguards of India will attract industry’s new assets (hopefully replicate Vanguard's low expense ratio process) If done so, I believe its going to be a gamechanger for the Mutual Fund Industry. Its also a great opportunity for Fintech start-ups in investing domain to reimagine and come up with innovating products, especially for the millennials!

Vanguard @Vanguard_Group

When you're facing an uphill climb, just remember… /\ /\/\/\ the view is beautiful /\ / \/\ from the top. /\/\/ /\/\/\ / \ / \ / \ / \

vgi.vgMake a plan to reach your savings goal | Vanguard

Happy Investing!

Cheers,

Kumar