June 19, 2013

Vanguard Brews Business in Fun-Filled (Pun-Filled) Summer Campaign

Low-cost indexing pioneer takes its message to the streets

If you need a jolt about the value of low-cost investing, Vanguard has a brew for you.

The investing behemoth is serving a warm cup of metaphor this summer in a novel marketing campaign aimed at illustrating how pennies saved add up over time.

The company has released the At-Cost Café, a roving food truck that sells cups of premium coffee for $0.26, in select cities. Commuters could start their morning recently with a cup outside New York’s Penn Station (and another, if desired, as it’s buy one get one free).

Why $0.26?

Vanguard says its funds cost a fifth of the industry average, so their coffee costs a fifth of the going rate for a quality cup of Joe.

“Get a taste of how Vanguard does business,” reads the pun- (and fun-) heavy campaign on its dedicated Web page.

“If you're wondering why one of the world's largest investment companies is selling premium coffee, here's the scoop. When you buy a great cup of coffee that's 1⁄5 the average price of coffee, you see for yourself that paying less means you keep more.”

Vanguard rhetorically asks: How can it offer coffee — er — mutual funds, for less?

“Our secret is simple: We offer our funds ‘at cost.’ That means you pay only what it costs us to run the funds, which happens to be—on average—1⁄5 as much as everyone else.”

They can do this, the site claims, because they're the only company in the industry that's client-owned.

“We're owned by our funds and the funds are owned by the people who invest in them, people like you. We don't generate profits for private owners or stockholders. We return profits to you as cost savings. Selling premium coffee for less is just a fun way to spread the word about costs.”

In a hypothetical example, the company notes that if a client invested $50,000 in a fund with the current average Vanguard expense ratio, and assumed a (generous) 6% annual return, in 30 years they could have $65,793 more than someone who invested in a fund with the industry's average expense ratio.

“So, over time,” it concludes, “letting your savings ‘brew’ with lower expenses could help you save more.”

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Check out Your Move, Bogleheads: Advisor Finds DFA’s Returns Trump Vanguard’s on AdvisorOne.

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