Vanguard Is the Costco of Finance, According to ‘Acquired’ Podcast Hosts

Most people know that Vanguard offers low-cost index funds. Some know that Vanguard is itself owned by those fund investors collectively. But few realize that this clever corporate structure is why the funds are so low cost. And why Americans have access to low-cost index funds at all.

The Vanguard Group manages the largest index funds in the world—nearly $12 trillion in passive index assets. It is the single largest owner of the majority of corporations in the S&P 500.

And together with the other large index-fund companies like BlackRock, State Street and Fidelity, it owns an estimated 24% of the entire U.S. stock market. Passive index funds are a behemoth hiding in plain sight.

Vanguard has a clever strategy. As it grows its assets and gains economies of scale, it shares that surplus value back with its customers—fundholders—in the form of reduced fees instead of keeping those dollars for itself. This playbook is akin to another great company that we studied on Acquired in 2023: Costco. Costco built a tremendous competitive advantage by capping its profit margins and sharing scale benefits with customers in the form of lower prices. As Costco scales, it becomes increasingly difficult for competitors to match its famously low prices. Vanguard is essentially the Costco of finance but taken to another level: thanks to its corporate structure, it captures no profits.