Vanguard is a giant in the sleepy space of passive investing...

The investment adviser has been leading the charge for passive over active management for decades.

Active investors struggle to keep up with the market. Less than 50% of them beat their benchmarks on average. Active managers also charge management fees that eat into returns, making the hurdle even steeper.

That's why if you aren't picking your own stocks, one of the best things you can do is invest in low-cost passive funds.

Investor John Bogle founded Vanguard in the mid-1970s... and quickly became the face of the passive-management movement. He created one of the first index funds available for the everyday investor.

Vanguard's first passive fund matched the S&P 500. Since then, it has added funds that track the Russell indexes, international markets, and mega-caps.

It has also been increasingly present in the world of bonds. Vanguard has an impressive $1 trillion bond indexing business in the U.S.

We typically discuss stocks in Altimetry Daily Authority... and we think that's where a good chunk of your money belongs.

Even so, bonds also have a place in your portfolio...

Similar to the equity side of the market, passive bond funds allow investors to simply get exposure to the bond market. As we'll discuss today, tools like these are crucial for any savvy investor.

Investing is less about picking the right company than you think...

It's true that it's important to pick the right positions for your portfolio... and stay away from potential torpedoes.

However, a great deal of research shows that much of a successful investment outcome comes from just being in the right assets.

Each month, subscribers to our Hidden Alpha and Altimeter Weekly advisories get a special report called the Timetable Investor. This report is essentially a "checkup" for the market.

In short, it looks at our macro outlook... and helps track changes in the market's health.

We don't pick stocks in the Timetable Investor. We don't tell subscribers how much money to invest in certain companies. Instead, we examine macro signals in four key areas – and explain what it means for your capital-allocation strategy.

Today, our analysis tells us that any money you'll need soon doesn't belong in stocks.

(If you're interested in accessing the Timetable Investor report, click here to learn more.)

If you need money in the near term, bonds are a great place to put it...

And one of the best places to store that money is in index funds. We think of them as "bank accounts for credit."

When you find opportunities for active investments, you shouldn't be buying those ideas out of cash. Use money you already have in the bond markets.

Vanguard offers a few great passive bond funds, like the Vanguard Total Bond Market Index Fund (BND) and the Vanguard Intermediate-Term Corporate Bond Index Fund (VCIT).

These funds only charge about 0.03% in fees, whereas some active funds cost more than 1% annually. Use these passive, low-fee vehicles as a source of funds to make sure you're in the right market... as opposed to focusing on beating the market as a whole.

That way, when a great opportunity comes up, you'll already have exposure where you need it most.


Joel Litman
June 5, 2023