Vanguard has kicked off a campaign to emphasize the importance that costs play in long-term investing. The centerpiece of the campaign is the mobile At-Cost Café, which sells hot and cold cups of coffee for $0.26, or one-fifth the average price.
The café is designed to raise awareness among investors about the impact of costs and help them understand how minimizing costs in their investment portfolios can potentially enable them to save more.
The café starts its seven-week U.S. tour today in San Diego, with scheduled stops in five other cities, including San Francisco; Chicago; Washington, D.C.; New York; and Boston. It will spend three days in each city in prominent, well-traveled locations. The full schedule and locations appear on the at-cost cafe website.
In addition to the café, Vanguard plans to increase its cost education efforts through its multiple online and social media channels during the next two months. Vanguard will tweet and post cost-centric content for its 88,000 Twitter followers, 280,000 Google+ followers, and nearly 125,000 Facebook fans.
This is the second time the fund company has rolled out the coffee truck. In March 2012, the Valley Forge, Pennsylvania-based purveyor of low-cost mutual funds introduced an ad campaign to encourage investors to understand that costs matter in their investment lives.
As part of the campaign, the "At-Cost Cafe" truck sold coffee at 1/5 the average price in four major Eastern cities.
This year, Vanguard also published its Principles for Investing Success, which outlines four key fundamental tenets: 1) Create clear and appropriate goals, 2) develop a suitable asset allocation using broadly diversified funds, 3) minimize cost, and 4) maintain perspective and long-term discipline. Cost is significant because every dollar paid in management fees or trading commissions is simply a dollar less that potentially could be earning return.
Newly updated Vanguard research affirms that individual investors, financial advisors, and defined contribution plan sponsors are beginning to understand the key role cost plays in a portfolio. In Costs matters: Are fund investors voting with their feet?, Vanguard researchers found that in the last ten years, investors continue to commit the largest amount in assets to low-cost products, largely due to the popularity of low-cost index funds and ETFs. The researchers also found that the asset-weighted expense ratio for U.S. equity funds dropped by 31% from 2003 to 2013, to 0.64%. For U.S. taxable bond funds, the asset-weighted expense ratio dropped by 28%, to 0.47%.
