How is Vanguards investment approach different to other fund managers?
As an index fund manager, Vanguard structures its portfolio to closely track the performance of a specified market index. Rather than holding every stock in the index, Vanguard builds its portfolios with the optimal number of securities to closely track the index performance, without incurring unnecessary transaction costs. It’s what we call optimised indexing. This way investors get all the benefits of holding a diversified portfolio like lower risk and the potential for improved returns, without the associated costs. Our approach is different to active managers who seek to outperform a benchmark or market index using a combination of stock picking, market timing and asset allocation. Active managers typically hold a much smaller number of securities than index managers but will generally have a high level of trading activity within the fund. With Vanguard, indexing is not about timing markets or picking hot stocks. Instead, the emphasis is on broad diversification within a specific i
