Despite Vanguard[profile] and American Funds [profile]'s major differences, i.e. one is known for indexing and the other is known for selling directly to investors, Morningstar's John Rekenthaler said the two fund companies are more alike than one would think. They retain employees, neither is known for trendy investment choices, they avoid risk and multiple investment managers, to name a few similarities.

Vanguard's PMs are usually Vanguard lifers and American Funds has PMs with more than 10 years on the job as well as a staff of career analysts. Both companies' funds spread their investments over a large number of assets and own many blue chip stocks, When American Funds offers emerging market funds, it does watered down versions that include developed countries to avoid risk, Rekenthaler pointed out.

They generally correlate with their benchmark indexes as well:

Because of their conservative construction, mainstream assets, and high diversification, both Vanguard's and American Funds' funds tend to act much like their benchmark indexes. These funds rarely deliver surprises, for good or ill.

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Edited by: Casey Quinlan


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