Is there any risk of having your entire portfolio in Vanguard index funds?
May 28th, 2010
And by risk I don’t mean market volatility… I mean risk as in Enron-type risk… Because Vanguard is a cooperative, is it even possible that someone is cooking the books or in a position to screw over the investors?
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Most likely no. There is always that option, but you’d have just as much risk with the other fund companies.
The only risk you’re taking is with the index funds. Generally with a managed fund you can significantly beat the index, just be sure to check expense ratios to make sure you’re not paying too much. My general rule is there is no need to pay more than a 1.25% expense ratio.
Be aware of what SIPC coverage is:
SIPC is not insurance, and the government does not back it.
The risk is minimal with large and established fund managers like Vanguard. Your investments are held separately from the fund management company’s funds and are SIPC-insured against management fraud.
it is not wise to have 100% of your portfolio in stocks.