The Vanguard Effect

As low-cost fund company Vanguard closes in on its best-ever year, Roben Farzad explains why it is thriving:

You’ve no doubt heard of the “Wal-Mart (WMTeffect.” Now the market is watching—with equal parts gratitude and trepidation—the rapid escalation of the “Vanguard effect.” It’s asymmetric warfare, as Vanguard’s sole ownership and constituency is its fundholders, the savings it wrings from its buying power are passed on to them, not to shareholders or partners. BlackRock (BLK),Charles Schwab (SCHW), Fidelity, and State Street cannot say the same.

Last month, Felix Salmon praised Vanguard's target-date funds and searched for something better.