The same point can be made for advisors who have built their practices on managing muni bond ladders. I often hear, “I prefer actively managed funds since indexing doesn’t work in less liquid markets.” Actually, Vanguard research shows that indexing has worked across all markets, as substantiated by S&P’s SPIVA report. A lot of the long-term performance shortfall of actively managed funds can be linked to higher management fees.
By spending too much of your valuable time on managing bond ladders, you may be missing out on other activities that produce client results and loyalty, such as asset location, rebalancing, spending strategies, and behavioral coaching (what we refer to as Vanguard Advisor’s Alpha®).
We believe this will change with the launch of our first muni bond index fund. Vanguard is taking a stand for more investors in one of the highest-cost segments on the markets.
So why the big deal about our new muni bond index fund/ETF? Simple: It’s provides a better solution for the majority of muni bond assets held by investors who are paying too much.
Ben Rost, CFP®, is a senior manager in Vanguard Portfolio Review Department, where he leads product management for Vanguard’s bond index funds and ETFs. Mr. Rost joined Vanguard in 2004 and has held a variety of financial sales and client service roles. He served as an investment analyst in Vanguard Portfolio Review Department and a project manager in Vanguard Corporate Strategy Group. Additionally, he was a manager in Vanguard’s fund and ETF research and development team for four years. Mr. Rost earned his B.A. from the University of Notre Dame and his M.B.A. from Villanova University. He holds FINRA Series 7 and 63 licenses.