“Investors should make expense ratios a primary test in fund selection. They are the most dependable predictor of performance. If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision.” Russel Kinnel, Morningstar’s director of mutual fund research

Numerous studies over the past 10 years have demonstrated that the best predictor of a mutual funds future performance is a fund’s expense ratio. Morningstar has even admitted that expenses are a better predictor of future returns than its own star rating system.

The bottom line is that expenses matter. And the lower, the better. And when it comes to mutual fund expenses, the average Vanguard mutual fund expense ratio is 83% less than the industry average. Vanguard derives much of its low-cost advantage from its unique corporate structure. Most other mutual fund companies are owned by private investors.

As a result, they operate to make a profit to the owners of the mutual fund company. By contrast, Vanguard is owned by its mutual funds and clients who invest in those funds. As a company, Vanguard is like a credit union for mutual funds. Each owner of a Vanguard fund is essentially a part-owner of Vanguard. There are no outside owners taking profits away. This allows Vanguard, a “not-for-profit company,” to pass cost savings through to mutual fund shareholders via lower expense ratios.

I have always been a big proponent of Vanguard Funds. Approximately 80 percent of our client’s assets under management at Capital Wealth Management are invested in Vanguard funds. In addition to its low expenses; Vanguard funds have no front loads, no commissions, no back-end loads, and no 12b-1 fees. vanguard has the largest selection of no-load index funds available to investors. Vanguard’s index funds avoid style drift, and generate the lowest tax consequences to their owners. With more than 100 funds, you can construct a well-diversified portfolio using Vanguard funds and never pay a commission while enjoying the lowest expenses in the industry.

This is not to say that Vanguard is always the right mutual fund company for everyone. There are hundreds of other mutual fund companies to choose from, and everyone’s situation is different. But when it comes to my personal savings and the vast majority of my client’s assets at Capital Wealth Management, Vanguard is the company I trust more than any other.
For the record, Capital Wealth Management is an independent fee-only registered investment advisor. We are not affiliated with Vanguard or any other mutual fund company.

Martin Krikorian is president of Capital Wealth Management, a registered investment adviser providing “fee-only” investment management services located at 9 Billerica Road, Chelmsford. He is the author of the investment books, “10 Chapters to Having a Successful Investment Portfolio” and the “7 Steps to Becoming a Better Investor.”
Martin can be reached at 978-244-9254, Capital Wealth Management’s website,, or via email at