How do companies like Blackrock and Vanguard make money?
In: 27
Fees
All brokerages charge fees to some extent. When trading individual stocks it may be a commission fee. For companies like Blackrock and Vanguard that manage funds, the funds have an expense ratio which is the fee for being in the fund. Some funds have load fees which charge you a certain percentage to buy into or sell out of the fund.
Vanguard runs a huge number of mutual funds and ETFs, they’re noted for their low fees but a small margin on a huge volume is still a lot of money. Their biggest fund is VFIAX which charges just 0.04% as a fee, but since its managing $416B that small percentage still turns into $166M/year on a fund where management is effectively setting a computer to track a specific index and printing tax forms once a year so its mostly profit.
Latest Answers