Vanguard has two share classes for its mutual funds. Investor shares are for hoi polloi and Admiral shares are for clients with high balances or who are long-term shareholders. When Morningstar took a look at investor returns for the two share classes, they noticed an interesting feature: large and/or patient investors had much better performance than retail investors.
It turns out the more patient and/or wealthier Vanguard investors fared better than those in the Retail investor class most of the time. Specifically, in 13 out of 15 cases, Admiral share-class investors enjoyed better investor returns than those in the Investor share class. Their margin was greater than the difference in expense ratios.
For example, in the firm’s flagship Total Stock Market fund, Admiral shareholders enjoyed returns of 6.16% annualized compared with 5.35% for Investor shares. At Vanguard Value Index, Admiral shareholders earned a 4.84% annualized return compared with 2.61% for Investor shares.
Interesting, is it not? It seems that perhaps patient investors do better than impatient investors, or that large investors are more patient than small investors—which may be related to how they achieved large investor status in the first place.
Posted by Mike Moody 
