Big news for you:
Vanguard, the largest mutual fund company in the world, now offers investment access to startups!
As a company executive just told Business Insider, its goal is to “bring this asset class to investors who need it the most” so they can improve their investment performance.
This is great news for you, right?
Not so fast…
Vanguard Gets Real
In 1976, Vanguard’s founder John Bogle created the first index fund for individual investors.
An index fund is a type of mutual fund or ETF. But rather than picking specific stocks, it simply holds all the stocks in an index like the S&P 500 or the Russell 2000.
Bogle believed the best way for ordinary people to succeed in the market was to invest in these well-diversified and low-cost index funds, and hold onto them over time.
Based on that simple vision, Vanguard became the largest provider of mutual funds in the world, with $7 trillion in assets.
But the world has become more complex recently…
Today, online brokers like Robinhood have made stock trading “free” and perhaps even addictive. Plus, there’s been increased criticism of the passive-investing style of index funds, and greater interest in momentum-based “meme stocks.”
Trends like these make it more difficult for Vanguard to compete and to make money.
So here’s what it decided to do…
Diving into Startups
In February 2020, Vanguard teamed up with a fund called HarbourVest so it could offer its customers access to private equity investments like startups.
As Business Insider reported, Vanguard's “principal motive in expanding into private equity was to improve client investment performance.”
After all, as company executive Fran Kinniry said, “There's not actually a close second investment that we could buy that has the ability to improve client outcomes as much.”
Investors seemed to agree: they quickly jumped on board — and a year later, its offering closed with twice as much money as it had been expecting.
That first fund was only available to institutions like pensions and endowments. But in May, Vanguard said it would be opening up a new fund to a wider range of investors…
So can regular investors like you finally invest in startups through Vanguard?
As it turns out, the answer is no.
Vanguard is only opening up its new fund to accredited investors — i.e., wealthy investors with at least $200k in annual income, or a net worth of at least $1 million.
That being said, in the future, Vanguard does expect to offer private equity investments to regular investors like you. The way it might do this is through your 401(k).
But when pressed to disclose the fees it would charge, Kinniry seemed to signal a new chapter for Vanguard: higher fees! Specifically, Kinniry said that Vanguard believes in low costs — but that its top priority is providing high returns. That’s not the Vanguard I used to know.
Bottom line: despite startups’ ability to deliver market-beating returns, Vanguard still doesn’t offer this asset class to investors like you.
And if it does offer it in the future, beware of the fees!
So, what can you do? How can you get access to this asset class today?
Three Easy Ways to Get Started
First, take a look at our free weekly “Deals” email. We send this out every Monday at 11am EST, and it contains a handful of new startup deals for you to explore.
Second, check out our free white papers like “Tips from the Pros.” These easy-to-read reports will teach you how to separate the good deals from the bad.
And lastly, over the years, we’ve created several premium services that can quickly help you build a portfolio of profitable startups, even if you have no experience at all. And unlike mutual fund companies like Vanguard, not only do we charge zero management fees, but we also ensure that you keep 100% of your profits. After all, they’re your profits!
To learn more, call our VIP Member Services department at 1-844-311-3191.