Occupy My Wallet: Moving Money Off Wall Street

If you're really ticked off at Wall Street, you've got some options: Grab your sleeping bag and head to the nearest protest site, or do something that actually pinches the big bankers' bottom line.

The second choice may be the smarter one. While Occupy Wall Street protests are colorful and make for good sound bites, what major bankers and money managers really care about are their pocketbooks, and pain in that department is most likely to get them rethinking their ways.

Activists at websites such as MoveYourMoneyProject.org recommend that savers switch from banks to credit unions, but there’s another alternative few are talking about. It's buying and holding low-cost index funds, rather than investing in the actively managed mutual funds and other products sold by the big banks and financial services firms. The beauty of such a "revolt" is that it deprives the Street of profits and saves investors money at the same time.

John Bogle, founder of the Vanguard Group and the first index mutual fund, doesn’t necessarily support the protesters. He does, however, think their anger toward Wall Street is justified and that indexing could be an effective means of boycotting the Street’s most speculative firms. “Indexing fulfills the Adam Smith-ian argument that if you do best for yourself, you will serve society well,” Bogle says. “The implication of that is if many more people indexed, there’d be much less trading in the market, and that’s good because it's costly. There’d also be much less big payoffs to investment managers, and that’s good for the returns earned by investors and good for our society, too.”

For instance, Vanguard’s Total Stock Market Index Fund has an expense ratio of 0.07 percent for its admiral share class. (The fund has a minimum investment of $10,000.) That compares with 1.12 percent for the average large-cap blend fund, according to Morningstar. So if you put $10,000 into the index fund, only $7 a year goes to the manager, compared with $112 for the average fund. Moreover, the fund has an average holding period for each of its stocks of 33 years, so very few trading commissions are being generated. By contrast, the average
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