The $5 footlong. The $340 laptop. Free two-day shipping. All
hallmarks of our economic times. Vanguard,
the 38-year-old low-cost investing pioneer, brings you the Great Deflation.
According to Bloomberg/Businessweek the fund company is not
just having its best year ever. (It shattered that record in September.) The
$130.4 billion in deposits in mutual funds and exchange-traded funds that
Vanguard has taken in through November is the most ever for the industry,
according to data from Strategic Insight. That beats the $129.6 billion that JPMorgan
(JPM) clocked, mostly for money market funds, in 2008. This year’s not over.
You’ve no doubt heard of the “Wal-Mart effect.” Now the
market is watching—with equal parts gratitude and trepidation—the rapid
escalation of the “Vanguard effect.” It’s asymmetric warfare, as Vanguard’s
sole ownership and constituency is its fundholders, the savings it wrings from
its buying power are passed on to them, not to shareholders or partners. BlackRock,
Charles Schwab, Fidelity, State Street and Northern Trust cannot say the same....
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