Vanguard Mid-Cap Value Index Fund Admiral

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Hef Saf
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Vanguard Mid-Cap Value Index Fund Admiral

Post by Hef Saf » Thu Apr 20, 2017 6:19 am

Hi
As a new investor, I`m spending a lot of time looking at different funds. Checking what sectors the fund based in.
I stumble on (VMVAX) by chance and saw the annual performance and was surprised at how good the numbers
were. Also noted was the fact that it has a risk ratio of 5
Wondering if anyone has it. On the surface, this fund seems like a good thing.

Her-Saf

stimulacra
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by stimulacra » Thu Apr 20, 2017 6:44 am

I hold some at about 5% of my total portfolio. It's done well in the past, it might do well in the future.

I have it for tilt (ditto with Small-Cap Value and Emerging Market) but other than that I don't pay too much attention to it except during rebalancing.

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nisiprius
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by nisiprius » Thu Apr 20, 2017 8:45 am

It might be a good thing. Many posters in this forum like mid-caps, and many posters believe it's worthwhile having a "value tilt." (I'm not sure myself, and I just shrug and use Total Market). Before you take any action, though, you should take a deep breath and not base your decision on the performance numbers. This can lead to serious miscalculations, especially after a long period of rising stock prices, because a) past performance really is not a good predictor of future results, and b) you always have to take into account risk as well as reward.

Among equally "good" investments, those with higher risk tend to have higher return when the stock market is going up, and fall more when the stock market is falling. In the long term, the higher risk investments may have higher return, but it is just compensation for the risk you're taking.

For example, using a tool called PortfolioVisualizer, over the range of years in which Vanguard Mid-Cap Value Index VMVIX existed, we see this comparison. "Portfolio" 1, blue, is 100% Vanguard Total Stock Market Index Fund, i.e. "the market," and the most commonly suggested stock fund in this forum; Portfolio 2, red, is 100% Vanguard Mid-Cap Value Index Fund. Don't take this comparison as anything definite, either, but do think about it.
Source
Image
  • It did have higher return, average (CAGR) 7.89%/year instead of 7.52%. $10,000 invested in each of them grew to $21,779 in Mid-cap Value, $21,024 in Total Stock. I personally don't consider that to be a big difference--not a sure thing for the next ten years, for example.
  • It also had more risk. This shows up in several ways. One is the way the red line dips lower in 2008-2009. The number that measures this, "max drawdown," is greater for mid-cap value.
  • The standard deviation, Stdev, a measure of "risk" or "fluctuation," an overall measure that includes short-term fluctuation, was higher for mid-cap value.
  • The Sharpe ratio is an overall measure of "risk-adjusted return." It's really just about the same, I don't think for an instant that the difference is robust or important--but it is no greater for mid-cap value and is actually a hair less. That means that, over this particular time period, the extra return of mid-cap value was not a free lunch, it was actually no more than justified by the higher volatility.
If you simply wanted to use mid-cap value as your core holding in place of the usually-suggested-here Total Stock Market Index Fund, that's not a crazy thing to do... but it's putting your personal spin, your personal taste on things. It's not a slam-dunk that mid-cap value is actually better. Maybe, maybe not: your money, your decision, your life. If you do choose it, be prepared to [b]commit to it--don't dump it if it happens to do somewhat worse for a few years.

Also, read up on Fama-French factors and be sure that you have some convincing-to-you reason to think this will overall be a better choice--some other reason than past performance.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

dbr
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by dbr » Thu Apr 20, 2017 9:04 am

Hef Saf wrote:Hi
As a new investor, I`m spending a lot of time looking at different funds. Checking what sectors the fund based in.
I stumble on (VMVAX) by chance and saw the annual performance and was surprised at how good the numbers
were. Also noted was the fact that it has a risk ratio of 5
Wondering if anyone has it. On the surface, this fund seems like a good thing.

Her-Saf


There is absolutely no reason to hold this fund nor to avoid it. Selecting funds to make up your portfolio does not come from being surprised to find "good numbers." A better approach is to learn more about asset allocation and the parameters of risk and return. After that one can start looking for a reasonable way to implement a planned asset allocation.

To anticipate the possible answers a little bit, a very good starting point is the three fund portfolio of total US and international stocks and a generic intermediate bond fund selected for an appropriate ratio of stocks to bonds. After that one can consider what changes or additions one really knows one might want to meet their personal judgment and preferences.
Last edited by dbr on Thu Apr 20, 2017 9:08 am, edited 1 time in total.

tigerdoc93
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by tigerdoc93 » Thu Apr 20, 2017 9:08 am

I tilt to small / mid cap value so I do own VMVAX. It represents about 5% of my stock portfolio. So far I'm pleased with this fund but the performance is very similar to the total stock market. I also own vanguard small cap value and dfa small cap funds. These funds do not track as closely to the total stock market and lately they have been outperforming. However, they are higher risk and can just as easily lose more than a total stock market fund.

dbr
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by dbr » Thu Apr 20, 2017 9:12 am

tigerdoc93 wrote:I tilt to small / mid cap value so I do own VMVAX. It represents about 5% of my stock portfolio. So far I'm pleased with this fund but the performance is very similar to the total stock market. I also own vanguard small cap value and dfa small cap funds. These funds do not track as closely to the total stock market and lately they have been outperforming. However, they are higher risk and can just as easily lose more than a total stock market fund.


Why would you be pleased? You could mean that you like the asset allocation you have devised and like the fact that holding this fund is part of obtaining that asset allocation. But what specifically would please you about it beyond that?

Hef Saf
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by Hef Saf » Thu Apr 20, 2017 9:15 am

Hi nisiprius

I`m now certain that I need more time and information before I do anything rash. But by looking at different
funds and asking about them in the forum. I believe I educate myself much better than digging thru the web. Trying to
arrange all the pieces of the investment puzzle together on my own. I`m so glad I found this forum.

Thanks for the post...much appreciated.

Her-Saf

aristotelian
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by aristotelian » Thu Apr 20, 2017 9:48 am

Are you investing in an IRA or brokerage account?

CrossOverGuy
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by CrossOverGuy » Thu Apr 20, 2017 10:45 am

I switched some assets to this fund recently from an active fund which targeted a similar part of the market, Fidelity Low-Priced Fund. This had a terrific record over the long-term (and I held it 10+ years); it had the same manager, Joel Tillinghast, all that time. But I noticed that the last number of years it hadn't done as well as the index, and some research seemed to indicate Vanguard Mid-Cap Value was fairly similar but, of course, a passive index. Sometimes when you've held a fund for quite a while and it's been a fine performer, you get a bit attached. But I'm trying to put more in index funds these days, and this seems like it will certainly match whatever that sector of the market does. Perhaps Mr. Tillinghast, the head of Low-Priced Fund, after a while is reverting to the mean by underperforming after many years of doing so well. Anyway, I thought a change to a similar-type index would be in order, and understanding how these kinds of funds work, I've been fine with it.

Hef Saf
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by Hef Saf » Thu Apr 20, 2017 10:49 am

Hi aristotelian

I have both accounts and believe they need modifications. The IRA is inherited, someone mentioned opening a stretch IRA.
I haven't contacted the retirement service department. Need to setup my distributions. That`s happening today or tomorrow.
Is it true you cannot add funds to an inherited IRA but I assume I can change the fund? Dad had high-risk funds.. 90% of his holdings.

IRA Details:
VHCAX Vanguard Capital Opportunity Fund Admiral Shares $82,503.90
VIMAX Vanguard Mid-Cap Index Fund Admiral Shares $227,396.98
VASVX Vanguard Selected Value Fund $214,035.80

rkhusky
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by rkhusky » Thu Apr 20, 2017 11:18 am

Frankly, if you are looking for funds based on recent performance without considering what stocks the funds contain or how much risk you are taking (full disclosure: this is how I started investing too), it might be worthwhile to start with the Vanguard Target Retirement fund that is closest to your planned retirement year and only deviate from that if you can articulate the reason why.

One good reason to deviate would be that you discover that the fund has more/less stock than you wish. Another reason to deviate might be that you want to own the individual funds that make up the TR fund, so that you can save a little bit on fees and you don't mind handling the portfolio maintenance yourself (rebalancing and glide path adjustments). Another good reason to deviate might be that you prefer more/less than 40% of your stocks being in international.

Hef Saf
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by Hef Saf » Thu Apr 20, 2017 11:33 am

Hi rkhusky

Funny you should mention this fund: Vanguard Target Retirement. Everyone mentioned the volatility of my father`s investments.
I exchanged two funds and added the Vanguard Target Retirement 2025. At the moment it has $150,000.
I`m talking with a vanguard planner may 1st. So I`ll hold off on any more modifications.

Her-Saf

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nisiprius
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Re: Vanguard Mid-Cap Value Index Fund Admiral

Post by nisiprius » Thu Apr 20, 2017 11:48 am

It makes sense to start with something reasonable, and then spend six months or a year deciding whether you want to refine it. It also makes sense to go slowly--the kind of investing Bogleheads do never involves any great urgency. As long as two portfolios have about the same percentage of stocks, they are not going to behave all that differently in a boom or a crash.

I think it is very likely that your conversation with a Vanguard planner will end up with something very close to a portfolio of four funds--Vanguard Total Stock Market Index Fund (U.S. stocks), Vanguard Total International Stock Market Index Fund (International stocks), Vanguard Total Bond Market Index Fund (U.S. investment-grade bonds), and Vanguard Total International Bond Market Index Fund (international investment-grade bonds, currency hedged so that fluctuations in the dollar don't cause much fluctuation in the dollar value of your holding).

And that it is very likely that the portfolio will resemble the portfolio in the Target Date fund.

In preparation for your meeting, I suggest you work through the Vanguard Get a Recommendation tool. Not that you necessarily use the recommendation immediately, just take a look at it, answer the questions, and see what portfolio is suggested.

After you've gotten something roughed out, you may or may not want to add a "value tilt" of some kind. I don't do this myself. I don't think the Vanguard rep will suggest this, but you might want to bring it up in the conversation.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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