Vanguard to Offer Private Equity Investments to Individuals

Vanguard to Offer Private Equity Investments to Individuals

Vanguard will begin offering private equity strategies to individual investors this summer. It will make the funds available only to qualified customers at first, but intends to include them in its hybrid robo-advisor platform, Personal Advisor Services, in the “near future,” according to the firm’s announcement.

Qualified customers include individuals and family offices with $5 million or more in investments (excluding their primary residences or business properties), along with certain financial professionals.

When news of Vanguard’s foray into private equity first emerged in 2019, we were skeptical.  We got some additional clarity on their plans in February, when the Malvern, Pa. giant announced that it had selected HarbourVest Partners to run its first private equity fund, available only to institutional clients.

But we’re still reserving judgement about the true value of this opportunity. Vanguard has been cagey about the details: We don’t know how big its first fund was, what its fees were, how successful it was at attracting investors and what it’s investing in—and of course, the performance of the fund will remain unknown for years to come. Typically, private equity funds require investors to hand over their assets for 7-10 years, with several years passing before any return is realized.

Their silence is also conspicuous when it comes to the fund’s cost structure. Offering low-cost alternatives to traditionally high-fee funds was how Vanguard became the trillion-dollar gorilla it is today in the mutual fund world, and you’d think that if their private equity product offered a true cost savings compared to its competitors, they’d be the first to tout it. We’ll be watching carefully to learn more, but in the meantime, we advise proceeding with extreme caution. The bulk of a decade is a long time to lock up your money in a black box.

Fidelity Tries to Tempt Teens

When it comes to attracting the young investor set, Robinhood has been hogging the headlines. Can Fidelity become the Pied Piper?

The Boston-based firm announced last week that it will issue debit cards and offer investing and savings accounts to 13- to 17-year-old children of clients. The accounts will let teens buy and sell U.S. stocks, Fidelity mutual funds and many exchange-traded funds. The teens won’t pay any account fees or commissions for online trading.

Of course, Fidelity has already helped lead the race to zero when it comes to fund fees, and now it’s looking to expand its roster of clients…presumably with “meme” stocks like GameStop and Tesla as the bait. According to Fidelity, they are already well on their way—they more than tripled new accounts from young adults in the first quarter of 2021 compared to last year.

We support efforts to get teens interested in finance. But we’re not sure handing over the password to a brokerage account and getting youngsters hooked on day trading is the best way to turn them into level-headed, long-term investors. To be fair, Fidelity has placed training wheels on the new youth offering: The teen account holders won’t be permitted to trade options or borrow on margin, and deposits will be capped at $30,000 annually.

We’d still encourage you to think about starting your teenager off with a Roth IRA rather than simply giving them their own brokerage account.

A Roth IRA can be a great starter investment. Even a relatively modest annual contribution of $1,000 starting at age 15 could grow to over $417,000 by age 70, assuming an average annual return of 6%. Max out their contribution and your teen could be a multi-millionaire by the time they retire.

Contributions to a Roth can be withdrawn penalty-free at any time, and a Roth owner can withdraw up to $10,000 in earnings on contributions after five years for a qualified first-time home purchase. Earnings can also be taken tax-free after five years for disability, death or once the account owner reaches age 59½. (For more on the benefits of Roths, check out our piece on Making Your Teen A Millionaire.)

More than just getting them interested in the stock market, we think it’s important to teach teens fiscal responsibility and the importance of long-term financial planning. They already have time in the market on their side—and as we know, it’s that, and not market timing, that leads to long-term investment success.

Podcast: Financial Spring Cleaning

The darling buds of May are in full blossom, and most people are taking some time to shake off the dust and straighten up. When you do, make sure you include your finances. Financial Planners Andrew Busa, JonPaul McBride and Diana Linn take to the mic this week to bring you six steps you should take to make sure your financial plan is up to date, including:

• Cleaning up your credit
• Setting your employee benefits straight
• Pruning old accounts
• Raking in unclaimed money
• …and more

Keeping things trim and on track is even more important for your pocketbook than it is for your perennials. But a few quick tips can keep you in bloom. Click here to listen now!

Adviser Investments’ Today’s Market Takeaways

There’s no shortage of hyperbolic headlines and provocative punditry in the financial media. But you won’t find such hysterics here. In Today’s Market Takeaways, members of our investment team provide timely videos that clearly and concisely explain what we’re seeing in the markets.

Research Analyst Liz Laprade talked about Bitcoin’s recent bumpy ride in the markets, while Vice President Steve Johnson envisions opportunity in the tech sector’s recent slump.

We hope you find these episodes engaging and accessible, and please let us know if there are any topics you’d like to hear us address by sending an email to info@adviserinvestments.com!

About Adviser Investments

Adviser Investments is a full service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trusts, institutions and foundations since 1994, and have more than 3,500 clients across the country and over $6 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, with particular expertise in Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To.

Our minimum account size is $350,000.  To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868.