Vanguard's Mistake

Since its founding in 1975, Vanguard Group has been one of the most unique, yet highly regarded, investment advisors in the county. Its uniqueness stems from its legal status as a non-profit, meaning that all profits are returned to investors, not outside shareholders. However, Vanguard and its management have recently come under fire for their stance on FTT’s- financial transaction taxes. FTT’s are preventative measures in place to combat the use of speculate trading activity, a high-frequency trading tactic that can be harmful to markets. Recently, Vanguard has switched their stance on FTT’s, claiming that they bring more harm to the US stock market than good. However, this is inherently untrue. Hong Kong, the third-largest stock market in the world (and the freest market in the world according to the Conservative Heritage Foundation), relies heavily on FTT’s to regulate the amount of high-frequency trading. Ultimately, Vanguard’s shift in opinion should cause no panic in its investors for the time being. However, investors in Vanguard mutual funds (and investors in any mutual-fund giants) should pay close attention to the stances of their companies on financial issues such as FTT’s. Becoming, and continuing to be, a well-informed investor is a great way to ensure the success of your portfolio. 1.20.20