Using Coffee to Better Understand Investing

Vanguard’s mobile At-Cost Café will sell hot and cold cups of coffee for $0.26, one-fifth the average price. The café is designed to raise awareness among investors about the impact of costs and help them understand how minimizing costs in their investment portfolios can potentially enable them to save more.

The café starts its seven-week U.S. tour today in San Diego, with scheduled stops in San Francisco, Chicago, Washington D.C., New York and Boston. It will spend three days in each city in prominent, well-traveled locations. The full schedule and locations appear on the At-Cost Café website.

In addition to the café, Vanguard plans to increase its cost education efforts through its multiple online and social media channels during the next two months. The company plans to elevate new content to its website (vanguard.com), focusing on how saving a little can go a long way, how costs can affect overall portfolio returns, and how investors are increasingly recognizing the power of broadly diversified, low-cost portfolios.

Vanguard also recently published its Principles for Investing Success, which outlines four key fundamental tenets: 1) Create clear and appropriate goals; 2) Develop a suitable asset allocation using broadly diversified funds; 3) Minimize cost; and 4) Maintain perspective and long-term discipline. Cost is significant because every dollar paid in management fees or trading commissions is simply a dollar less that potentially could be earning return, Vanguard said.

“Planning for a financially secure retirement is a huge challenge that many individuals face in this country,” said Paul Heller, managing director and head of Vanguard’s Retail Investor Group. “Low costs are a critical factor in determining retirement readiness, and Vanguard believes that educating investors about cost will give them a better chance of investment success.”

Vanguard research affirms that individual investors, financial advisers, and defined contribution plan sponsors are beginning to understand the key role cost plays in a portfolio. In the report “Costs Matter: Are Fund Investors Voting with Their Feet?,” researchers found that in the last 10 years, investors continue to commit the largest amount in assets to low-cost products, largely due to the popularity of low-cost index funds and ETFs. The researchers also found that the asset-weighted expense ratio for U.S. equity funds dropped by 31% from 2003 to 2013, to 0.64%. For U.S. taxable bond funds, the asset-weighted expense ratio dropped by 28%, to 0.47%.