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Vanguard ETFs and Index Funds - What You Should Know - YouTube
Channel: Jarrad Morrow
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the vanguard group is like a car that
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you can drive across the country it's
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not the flashiest one on the road but it
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still looks good and is the most
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reliable one out there but there are a
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few things that you need to know about
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the vanguard etf and index fund
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investments that not a lot of people are
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aware of that will probably change how
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you view the company in this video i'm
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going to take you behind the scenes to
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look under the hood of what's really
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going on with vanguard to understand why
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vanguard is the way they are i first
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need to introduce you to the man who
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founded the company john bogle also
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sometimes referred to as jack bogle he
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founded vanguard in 1975 and his top
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priority from the very beginning was to
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put the investor first jack had been a
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part of the professional investing
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business for many years so he saw
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firsthand how much these money managers
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were ripping off the average person like
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you and me to set some of this up and to
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put it into perspective a little bit
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when jack passed away in 2019 it was
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reported that his net worth was around
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80 million dollars with half of it going
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to charity i know that's a lot of money
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because it is but if you take into
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account the fact that vanguard's assets
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under management at that time was around
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five trillion dollars with a t his net
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worth should have actually been in the
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billions of dollars but there's an
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interesting reason he wasn't that rich
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which we'll cover in just a minute so
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hang tight to get an idea of why
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vanguard is so unique we have to go all
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the way back to 1972 when the first
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index fund was created but it wasn't
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actually created by vanguard in 1975
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jack bogle launched the first vanguard s
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p 500 index fund and even though he
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didn't come up with the idea of index
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funds in general he made them one of the
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most popular investments that we all
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know today it's obvious how successful
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they've become now but back then index
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funds were a very very unpopular idea
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people laughed at him because who in the
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world would want to accept average stock
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market returns every single year
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professional stock brokers and
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individuals were only interested in
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beating the stock market duh but that's
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kind of like today so i guess nothing
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has really changed to beat the market
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you and your professional advisor need
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to be buying and selling stocks on your
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own because you know big egos now
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vanguard does offer actively managed
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funds today but that's mainly because
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they want to give their investors
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options if that's the way that they
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choose to invest so even though the
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company was built on index funds they
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still offer those actively managed funds
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as well if you're enjoying this video so
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far then help support my dog molly by
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hitting that thumbs up button i'll tell
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you what for every thumbs up that i get
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within the first month of this video
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being released i'll take her on a one
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mile hike by the end of the year so 1
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000 likes equals 1 000 miles i might be
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regretting that commitment but oh well
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let's give it a try remember how i said
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that jack gave up billions of dollars in
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net worth the main reason for that is
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because he has never been the sole owner
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of vanguard you know i'm doing fine but
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i don't own vanguard i've never owned a
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share of vanguard
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and but i've been paid a nice salary and
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what decent salary a nice bonus when i
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was running the place
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so i'm not complaining
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but i just don't have and never will
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have the kind of wealth that
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most people in this business have gotten
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because they charge their investors too
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much for what they're worth usually when
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someone starts a business they own all
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or at least the majority of the company
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since that person is taking most of the
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risk they're usually and rightfully
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rewarded if it succeeds but from the
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very beginning jack set up vanguard to
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be owned by the actual investors meaning
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that when you own any shares of a
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vanguard fund you are considered an
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owner and shareholder of the vanguard
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group now here's your fund it's run by
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vanguard and you own vanguard and
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vanguard also runs a whole bunch of
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other funds and we allocate the cost
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among those funds they're now probably
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165 of them so the costs are allocated
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depending on the fund's own cost
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depending on competition depending on
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fairness things like that if you want to
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know where incentives lie within the
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financial industry then all you have to
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do is follow the money and find out who
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actually owns the company for vanguard
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we are the owners of the company so the
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incentives are aligned with our best
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interest in mind and that's because jack
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thought that that was just the right
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thing to do on the other hand fidelity
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for example is a private company owned
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by the founders families employees and
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ex-employees incentives are aligned with
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those three groups of people and not
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someone who uses their funds charles
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schwab is a publicly traded company so
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the incentives lie with individuals who
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own that stock blackrock who offers the
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popular i share etfs is a publicly
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traded company so their shareholders are
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their top priority and not you state
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street who offers the most popular spy
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etf is a publicly traded company so if
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you own their investment funds then
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sorry they're not looking out for you
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and if you want to know what highway
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robbery really looks like then go check
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out the investments that companies like
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t rowe price edward jones and other
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investment firms like that are pushing
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to their investors stand it's gone
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what's all going the money in your
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account it didn't do too well it's god
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the good news is that with vanguard etfs
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you're able to invest in them on any of
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the investment platforms out there so
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even if you prefer the fidelity charles
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schwab or td ameritrade platforms you
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still have access to those vanguard
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investments which means that you can be
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an owner for me i love vanguard
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investments but i'm not a huge fan of
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the vanguard investing platform i
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personally prefer m1 finance because
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it's a lot more user friendly i'll have
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a link to check them out down in the
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description where you can also get a
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free 30 for signing up jack said my
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ideas are simple in investing you get
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what you don't pay for since vanguard
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investors own the actual company the
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benefits of that ownership comes in the
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form of some of the lowest fees in the
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industry other mutual fund companies are
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trying to turn a profit so that the
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owners can benefit vanguard is taking
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that would-be profit and returning it to
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their shareholders in the form of lower
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fees vanguard has 130 mutual funds and
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76 etfs with an average expense ratio of
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.09 percent while the industry has an
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average expense ratio of 0.54 that's a
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cost of 90 cents versus 5 dollars and 40
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cents per 1 000 invested i'll tell you
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what i'll make you a deal if you like to
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pay six times more for something then i
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just drew a picture of this elephant
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that i'm willing to sell you and to top
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it off i'll even turn it into an nft
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that you can eventually take in the
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metaverse if you like i know it looks
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like a dog but there's proof on the
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blockchain that it's an elephant i swear
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not only are vanguard expenses very low
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today they recently came out and said
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how they plan to cut costs on their
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investment funds by 1 billion over the
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next four years it's a race to the
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bottom and vanguard is able to be at the
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forefront since their main goal is to
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return value back to you as their
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shareholder etfs are my personal
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preferred investment vehicle right now
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but vanguard was late to the party with
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offering their first one it wasn't
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because they were sitting on their
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thumbs waiting around though they held
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off on purpose state street launched the
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first etf spy which tracks the s p 500
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in 1993. this head start is one of the
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big reasons that they currently have the
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largest assets under management of 449
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billion dollars while vanguard's total
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stock market etf is sitting in third at
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296 billion in assets under management
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vanguard launched its first exchange
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traded fund in 2001 eight years after
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the first etf started trading the main
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reason for holding off on this
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investment vehicle is because they were
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looked at as a way to trade for the
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short term with etfs you can buy and
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sell them at any point in time when the
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stock market is open just like you can
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in an individual stock on the surface
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this might not seem like a big deal but
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it is when you realize that so many
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investors are more likely to panic sell
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when stocks are down in the short term
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on the other hand with index funds what
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vanguard is known for trading is
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actually done at the end of each day if
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you place a trade for an index fund in
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the middle of the day then the shares
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won't actually be bought or sold until
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the market has closed that day as time
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went on and vanguard realized their
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investors wanted access to this type of
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investment they started creating ones
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that mirrored their index funds this is
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why they offer something like the total
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stock market index fund vtsax and the
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etf version of the total market index
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fund which is vti to be honest with you
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it's a really good thing they eventually
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got into the etf space when they did
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because money flowing into etfs has been
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off the charts over the past few years
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etfs at vanguard accounted for only 24
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of their total assets in 2021 but in
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that same year 92 of their net flows
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went into etfs i'm gonna make a
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prediction here eventually the etf
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business at vanguard is going to be
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equal to or bigger than their mutual
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fund business etfs are just becoming too
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popular so wait for it vanguard was
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hesitant to add etfs early on because
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the company's values stem from their
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founder jack bogle he's a firm believer
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in buying and holding your investments
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to avoid the short-term turmoil that we
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all see in the stock market on a
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day-to-day basis in john's eyes true
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wealth is better created over the long
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term as opposed to a fly-by-night
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strategy that most people are hoping for
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we've all heard the stories about people
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who win the lottery then eventually go
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broke those people never worked for it
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and didn't learn how to slowly manage
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larger and larger amounts of money over
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time there's a ton of lessons to be
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learned along the way of the wealth
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building journey that get easily
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overlooked it's not something that can
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necessarily be taught it has to actually
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be experienced check out this video to
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your left on my top 5 vanguard etfs to
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buy and hold forever make sure to tap
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that thumbs up button and get access to
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the private financial independence
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community down in the description below
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to meet up with and learn from a group
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of like-minded people on the path to
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financial independence i'll see in the
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next one friends done
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