Actively Managed Vanguard Funds an Indexer Could Love
Vanguard founder Jack Bogle's secret active-fund-picking formula.
Below is an excerpt from a recent issue of our Vanguard Fund Family Report. To view a risk-free trial issue, click here. Also note that Fund Family Reports for Fidelity and American Funds are available.
Besides index funds, Vanguard is known for a few actively managed funds good enough to give even inveterate passive investors second thoughts. What they may not realize, however, is that Vanguard founder and indexing evangelist John C. Bogle has a formula for picking managed funds.
The idea that Bogle would recommend funds run by securities-pickers isn't as scandalous as it sounds. Vanguard has offered actively managed funds since its beginning and even a zealot like Bogle realizes he can't win over everyone. Many investors, whether out of intellectual curiosity, hubris, or just for thrills, will always hunt for market-beating funds. So, in his classic book Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor Bogle laid out some active-fund-picking rules that stress consistency, tax-efficiency, frugality, experience, and patience.
Dan Culloton has a position in the following securities mentioned above: VGHCX. Find out about Morningstar’s editorial policies.