Vanguard Mutual Funds is Richest with $1.3 Trillion Assets

Latest news reports say that Vanguard mutual funds has emerged as the biggest US mutual fund company, beating long-time leader Fidelity Investments. Financial news cites data from Investment Company Institute, the National Association of US investment companies for July 31, 2010. Vanguard mutual funds has assets valued at US $1.31 trillion in its fund portfolios compared to the fund assets of Fidelity Investments which has US $1.24 trillion. Fidelity Investments had been the top mutual fund company for almost twenty years.

Vanguard mutual funds concentrate on index fund investing. Rather than investing in selected stocks, index funds invest in the stocks constituting the entire index or which are representative of the index. For example, the Dow Jones Index or Dow Jones Industrial Average (DJIA) has a list of 30 stocks of companies which are regarded as leaders in their sector. Some of the company stocks included in DJIA are 3M, Coca Cola, IBM, Merck and Walt Disney. An index fund, which invests in the DJIA, would have shares of all the thirty company stocks in its fund portfolio in similar ratio as the DJIA or may have a representative sample. Vanguard's Total Stock Market Index fund is worth US $121 billion and is its largest fund. Of the total amount of money invested in its mutual funds, 80% is said to go to its index funds.

Market research companies have noted a shift in mutual fund investment patterns. People are withdrawing their money from mutual funds in which professional fund managers pick and choose stocks from various companies, also referred to as actively managed funds. In contrast, mutual funds in which there are minimal stock-related decisions made are called passive managed. It is these passively managed funds that are attracting more investors. A classic example of a passively managed fund type is an index fund. Vanguard mutual funds, which are indexed funds, are passively managed. Such mutual funds are cheaper as there are fewer transactions and therefore less transaction costs. Charges of Vanguard mutual funds tend to be lower than that of actively managed mutual funds.

Vanguard Mutual Funds List

Vanguard was founded in 1975 by John Bogle, with its headquarters at Pennsylvania. It began with 11 mutual funds. John Bogle consistently advocated investments in index funds that have lower costs than actively managed funds. He was sceptical about the abilities of stock portfolio managers and the costs associated with them. Bogle was named among the 100 most influential people in the world by Time magazine in 1994.

In 1976, it created the first index mutual fund known as First Index Investment Fund. As largest among Vanguard mutual funds, it is now known as Vanguard 500 Index Fund and is now worth US $87 billion. The Prime Money Market, one of Vanguard money market mutual funds, follows closely.

From beginning with 11 mutual funds, the Vanguard mutual funds list has expanded to include 150 domestic mutual funds and 50 foreign market mutual funds. The initial value of its mutual fund assets was $1.8 billion. Today, it has crossed the $1 trillion mark.

The Vanguard mutual funds list includes:

• Vanguard 500 Index (VFINX) - The VFINX invests in the Standard & Poor (S&P) 500 Index. This means that it has stocks of the 500 leading large-cap companies in the United States (US). Worth $ 87 billion, this index fund is now four times the size of the Fidelity Magellan (FMAGX). Vanguard claims that the expense ratio of this fund is 84% lower than other similar funds.
• Prime Money Market (VMMXX) - A money market fund is a low risk, low return investment. One among several Vanguard money market mutual funds, the Prime Money Market fund has certificates of deposits, US Treasury Bills and commercial paper among its investments. Money market funds try to maintain a Net Asset Value (NAV) of US $1. Started in inception in 1975, and the first among Vanguard money market mutual funds, VMMXX is the second largest among Vanguard mutual funds.
• Emerging Markets Stock Index (VEIEX) - This Vanguard mutual fund invests in stocks of companies in emerging markets such as Brazil, China and Taiwan. It follows the Morgan Stanley Capital International (MSCI) Emerging Market Index. It has stocks of China Mobile, Gazprom and Samsung Electronics among many its portfolio.

The Vanguard mutual funds list is exhaustive and also includes funds which invest in bonds and small cap companies.

Choosing Vanguard Mutual Funds

Vanguard's founder, John Bogle, has always criticised the high cost involved in investing in stocks and funds. The creator of index mutual funds, John Bogle, advocates that investors in markets should emphasis on low cost. In an interview to CBS moneywatch.com, in July 2010, Bogle criticised the financial industry, which he claimed put the investors last.

That's why the reason for choosing Vanguard mutual funds has been its option of low cost index mutual funds. Its largest fund - the Vanguard 500 index is a passively managed fund, which means that portfolio decisions are kept to a minimum. Passively managed indexed funds are not only cheaper than actively managed mutual funds with a professional portfolio manager, but are also simpler to understand as it tracks an entire index. The costs in Vanguard mutual funds such as the 500 Index are less as it is passively managed.

The expense ratio, which is the ratio of operating expenses to the value of its assets, is significantly less in the case of Vanguard mutual funds. A high operating expense can reduce the returns to investors of the mutual fund. Vanguard reports that its expense ratio for the 500 Index fund is 84% lower than that of other mutual fund companies. This is attractive for investors who are thinking of choosing Vanguard mutual funds.

Investors choosing Vanguard mutual funds not only have low cost index funds as an advantage, but can also avail of other investment assets such as Exchange Traded Funds (ETF) and bond funds.

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