Sell VGHAX Vanguard Health Care Fund Admiral?

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rhornback
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Sell VGHAX Vanguard Health Care Fund Admiral?

Post by rhornback » Fri Nov 29, 2019 8:24 pm

I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Grt2bOutdoors » Fri Nov 29, 2019 8:28 pm

It's one of the rules of the forum not to write or speak about certain topics. Read the forum rules to gain a deeper understanding of one of the factors that may be affecting that fund. Other factors - healthcare is out of favor, earnings growth is not there, patents expiration, fewer new blockbuster drugs, price compression (earnings growth), lawsuits, etc.

Do you read the annual and semi annual reports for this fund from the manager? What do they say?
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Haeysh
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Haeysh » Fri Nov 29, 2019 8:48 pm

Sold mine last week. Lesson learned. No more sectors for me!

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by retire2022 » Fri Nov 29, 2019 8:51 pm

rhornback wrote:
Fri Nov 29, 2019 8:24 pm
I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!
rhornback

I had this fund since Feb 2015 and it is on my list to sell right now I am waiting for the ex dividends and Dec 2019 and March 2020, my only lost is down to $1200.

This is a active sector fund and is only 7.25% of my entire portfolio and is currently in my Roth IRA.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Rosencrantz1 » Fri Nov 29, 2019 8:56 pm

rhornback wrote:
Fri Nov 29, 2019 8:24 pm
I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!
I used Portfolio Visualizer to back-check VGHAX and it appears to have performed quite well over various periods of time. I like your logic re: health care and have been a long time holder of VHT for those reasons. I don't see dumping my health care sector fund in the foreseeable future.

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rhornback
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by rhornback » Fri Nov 29, 2019 9:00 pm

Grt2bOutdoors wrote:
Fri Nov 29, 2019 8:28 pm
It's one of the rules of the forum not to write or speak about certain topics. Read the forum rules to gain a deeper understanding of one of the factors that may be affecting that fund. Other factors - healthcare is out of favor, earnings growth is not there, patents expiration, fewer new blockbuster drugs, price compression (earnings growth), lawsuits, etc.

Do you read the annual and semi annual reports for this fund from the manager? What do they say?
Gotcha on the forum rules. I really do not want a political discussion.

Actually to answer your question I generally do not read the annual reports (I am pretty passive). I took your advice and looked at the last Vanguard Health Annual Report. It is here if anyone is interested

https://www.vanguard.com/funds/reports/q520.pdf

I really like this statement (from the advisers).

Over the long term, innovation, an aging population, and the globalization of
demand for cutting-edge health care should continue to drive the growth of
the health care sector. We believe that we are favorably positioned to capitalize
on that potential growth.

I am going to stick with Vanguard Health for a few more years. I still believe in Health Care innovation.

Thanks for your reply.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Gideon » Fri Nov 29, 2019 9:19 pm

rhornback wrote:
Fri Nov 29, 2019 8:24 pm
So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%
Although, the 5-year rate of return on VGHAX is 7.5%, its benchmark (MSCI ACWI Health Care) returned 6.65% over that period, so the fund met its objective of beating the relevant index to which it compares itself. I didn't check the data, but if VGHAX has outperformed the S&P 500 in every five-year period you remember, it sounds like it was ripe for a reversion to the mean. The health care sector as a whole has underperformed the S&P 500 over the last five years, and, for many investors, that is a reason for investing in health care. The returns do not necessarily correlate with the market's return in good times or bad. I would ask yourself whether your original reason for investing in VGHAX has changed. If it has, consider selling. If not, stay the course and maybe you'll enjoy having purchased the fund at a discount over the last five years.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by snailderby » Fri Nov 29, 2019 9:59 pm

From time to time, someone posts here saying they think healthcare or tech or [fill in the blank with another sector] has immense promise because [fill in the blank with some reason], but how much of that is already priced in?

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by sperry8 » Fri Nov 29, 2019 10:02 pm

I sold half my health care holdings in June. Poor timing as HC has been on a tear since then. However the active funds returns are much worse in taxable (where mine were) so I wanted to remove as much as possible (without moving into the next bracket). Plus the sector ETF has beaten the active fund for quite some time. Ed Owens (the former manager) is where the outperformance of this fund primarily came from. Jean Hynes, the new manager has barely (if at all) outperformed the index. It's time to move on imo.
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by nedsaid » Fri Nov 29, 2019 10:23 pm

rhornback wrote:
Fri Nov 29, 2019 8:24 pm
I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!
Everyone has known that the baby boomers are getting older for over 40 years now! We also all know that healthcare spending goes up as you get older. Problem is that there is a large countervailing trend of cost containment within healthcare. For example, profit margins for a Healthcare system I worked for shrank from 7% to 2% over the 15 1/2 years I was there. Not sure I would buy hospital stocks. Lots of pressure to reduce prescription prices also. People are at the limits of what they can pay for health insurance. So this sector is not the slam dunk it was 30 years ago. It was a no-brainer back then, the case for a healthcare sector stock fund is harder to make today.
A fool and his money are good for business.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Cautionary Tale » Fri Nov 29, 2019 10:44 pm

Curious as to what percentage of your portfolio is in healthcare.

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rhornback
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by rhornback » Sat Nov 30, 2019 8:16 am

sperry8 wrote:
Fri Nov 29, 2019 10:02 pm
I sold half my health care holdings in June. Poor timing as HC has been on a tear since then. However the active funds returns are much worse in taxable (where mine were) so I wanted to remove as much as possible (without moving into the next bracket). Plus the sector ETF has beaten the active fund for quite some time. Ed Owens (the former manager) is where the outperformance of this fund primarily came from. Jean Hynes, the new manager has barely (if at all) outperformed the index. It's time to move on imo.
Thank you for this insight. This is helpful. When a manager turns over, it is a good time to reflect on keeping or selling an actively managed fund.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by rhornback » Sat Nov 30, 2019 8:27 am

nedsaid wrote:
Fri Nov 29, 2019 10:23 pm
rhornback wrote:
Fri Nov 29, 2019 8:24 pm
I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!
Everyone has known that the baby boomers are getting older for over 40 years now! We also all know that healthcare spending goes up as you get older. Problem is that there is a large countervailing trend of cost containment within healthcare. For example, profit margins for a Healthcare system I worked for shrank from 7% to 2% over the 15 1/2 years I was there. Not sure I would buy hospital stocks. Lots of pressure to reduce prescription prices also. People are at the limits of what they can pay for health insurance. So this sector is not the slam dunk it was 30 years ago. It was a no-brainer back then, the case for a healthcare sector stock fund is harder to make today.
I have been noticing this as well: a lot of cost containment in the health care industry. For example I have noticed that work that would have gone to doctors in the past is now done by physician assistants. Drug manufacturing moving to China / India. Decreased re-reimbursement rates for pharmacies. Still there is innovation going on in healthcare.

The corollary to 'as baby boomers age they will use more healthcare' is that if healthcare becomes too expensive there may be a push to regulate it.

Appreciate the comments. I am going to watch and reflect on this sector a little more.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by gd » Sat Nov 30, 2019 8:38 am

rhornback wrote:
Fri Nov 29, 2019 9:00 pm
I really like this statement (from the advisers).

Over the long term, innovation, an aging population, and the globalization of
demand for cutting-edge health care should continue to drive the growth of
the health care sector. We believe that we are favorably positioned to capitalize
on that potential growth.
Well, yeah, they wrote it to do that. It's basically an advertisement, like any corporate press release, management statement or public "discussion" with stock analysts. Alternate version:

Over the long term, unpredictable innovation will undercut our major industry players, an aging population will apply regulatory pressure to hold down health care profits domestically as has been true overseas for decades due to 1st-world regulation of for-profit health care outside the USA, and the globalization of health care services and products will pull profits down as the health care industry goes the way of consumer manufacturing and customer service call centers. We believe the health care industry faces a difficult investing climate in the next few years, and advise caution in holding or purchasing our fund.

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rhornback
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by rhornback » Sat Nov 30, 2019 8:56 am

gd wrote:
Sat Nov 30, 2019 8:38 am
rhornback wrote:
Fri Nov 29, 2019 9:00 pm
I really like this statement (from the advisers).

Over the long term, innovation, an aging population, and the globalization of
demand for cutting-edge health care should continue to drive the growth of
the health care sector. We believe that we are favorably positioned to capitalize
on that potential growth.
Well, yeah, they wrote it to do that. It's basically an advertisement, like any corporate press release, management statement or public "discussion" with stock analysts. Alternate version:

Over the long term, unpredictable innovation will undercut our major industry players, an aging population will apply regulatory pressure to hold down health care profits domestically as has been true overseas for decades due to 1st-world regulation of for-profit health care outside the USA, and the globalization of health care services and products will pull profits down as the health care industry goes the way of consumer manufacturing and customer service call centers. We believe the health care industry faces a difficult investing climate in the next few years, and advise caution in holding or purchasing our fund.
I agree with your message. I will probably watch, wait, and reflect for another year or two. I think one of the reasons for my success in investments is my reluctance to buy and sell very often.

I believe Vanguard Health is up 8.5% this year. Maybe an argument could be made for Vanguard Health as a defensive stock. In a recession fewer will consume healthcare but you cannot completely go without it.

Actually 8.5% is not really all that bad. I tell my son that home runs are exciting but singles and doubles win ball games.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by goingup » Sat Nov 30, 2019 9:11 am

rhornback wrote:
Fri Nov 29, 2019 8:24 pm
Vanguard Health has been a core holding for me for 20 years.
I wouldn't recommend a sector fund as a "core" holding. Holding it as 5-15% of your equity allocation would be more typical. If it's more than 20% of your equity holdings, I'd think about paring it back.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by nedsaid » Sat Nov 30, 2019 9:25 am

rhornback wrote:
Sat Nov 30, 2019 8:27 am
nedsaid wrote:
Fri Nov 29, 2019 10:23 pm
rhornback wrote:
Fri Nov 29, 2019 8:24 pm
I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!
Everyone has known that the baby boomers are getting older for over 40 years now! We also all know that healthcare spending goes up as you get older. Problem is that there is a large countervailing trend of cost containment within healthcare. For example, profit margins for a Healthcare system I worked for shrank from 7% to 2% over the 15 1/2 years I was there. Not sure I would buy hospital stocks. Lots of pressure to reduce prescription prices also. People are at the limits of what they can pay for health insurance. So this sector is not the slam dunk it was 30 years ago. It was a no-brainer back then, the case for a healthcare sector stock fund is harder to make today.
I have been noticing this as well: a lot of cost containment in the health care industry. For example I have noticed that work that would have gone to doctors in the past is now done by physician assistants. Drug manufacturing moving to China / India. Decreased re-reimbursement rates for pharmacies. Still there is innovation going on in healthcare.

The corollary to 'as baby boomers age they will use more healthcare' is that if healthcare becomes too expensive there may be a push to regulate it.

Appreciate the comments. I am going to watch and reflect on this sector a little more.
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Kenkat » Sat Nov 30, 2019 9:42 am

If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time. I think you are making a behavioral / recency decision here. We can search for all the reasons why healthcare may no longer be a good investment, but I think that is searching for an answer that is not there.

This is one reason why a market weighted portfolio can be a good idea. It is hard to wait out periods of underperformance, which sometimes can last a long time - sometimes long enough to equate to “forever” given our limited time here on earth. The absolute worst thing to do is buy the “hot” sector and then dump it when it cools down. Better to just avoid that if that’s the inclination.

I’ve been posting for a long time on this board and the predecessor Morningstar board and this is a regular thing. Fund starts to underperform, the “should I dump fund” posts start, and we then discuss whether the fund is still any good, why “something” has (or has not) changed, etc. Value funds (both now and in 1999), International, REIT, etc. They will all underperform and outperform and the worst thing you can do is chase that. Either you are in or you are out. Either you stick to it very long term or you say, do you know what, this is not me and all this following of that sector or this sector isn’t worth it. Slant or don’t slant; both are fine long term. Switch back and forth between the strategies? Not good.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by sperry8 » Sat Nov 30, 2019 9:48 am

Kenkat wrote:
Sat Nov 30, 2019 9:42 am
If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time.
Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Kenkat » Sat Nov 30, 2019 9:56 am

sperry8 wrote:
Sat Nov 30, 2019 9:48 am
Kenkat wrote:
Sat Nov 30, 2019 9:42 am
If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time.
Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
Active funds will sometimes also underperform the index they track. That’s one of the risks of buying an active fund. But again, 5 years - it could be a trend or it could be random noise. It’s impossible to say. If you believe in the healthcare sector, the index would be a good choice. I held Windsor II for a long time because the index choices for value were poor, but have since switched to holding Value Index instead once Vanguard introduced the MSCI tracked indexes.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by bltn » Sat Nov 30, 2019 10:00 am

I invested in the Vanguard Healthcare Fund about 20 years ago. At the time I thought the growth potential was huge. Recently I sold all of my low capital gain shares and put the proceeds into my VTI holding. I still have about 3% of my portfolio in the VHC fund. With capital gains comprising more than half. I ll sell these when I need the money and meanwhile transfer the large annual capital gain and dividend payouts elsewhere.
Over 20 years that fund outperformed the market, but like some of the others, I also feel that its best days are over.
I don t believe in sector fund investing now

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by livesoft » Sat Nov 30, 2019 10:39 am

retire2022 wrote:
Fri Nov 29, 2019 8:51 pm
I had this fund since Feb 2015 and it is on my list to sell right now I am waiting for the ex dividends and Dec 2019 and March 2020, my only lost is down to $1200.
What is the point of waiting for the "ex dividends"? I don't see why that would have anything to do with this decision.
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by sperry8 » Sat Nov 30, 2019 10:50 am

Kenkat wrote:
Sat Nov 30, 2019 9:56 am
sperry8 wrote:
Sat Nov 30, 2019 9:48 am
Kenkat wrote:
Sat Nov 30, 2019 9:42 am
If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time.
Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
Active funds will sometimes also underperform the index they track. That’s one of the risks of buying an active fund. But again, 5 years - it could be a trend or it could be random noise. It’s impossible to say. If you believe in the healthcare sector, the index would be a good choice. I held Windsor II for a long time because the index choices for value were poor, but have since switched to holding Value Index instead once Vanguard introduced the MSCI tracked indexes.
Agree re active v index. But in this fund in particular if you overlay outperformance v underperformance there is a big difference between old manager v new. Of course, there is also a big difference between the size (assets held in the fund), i.e., outperformance happened when it was smaller rather than larger. So while I agree 5 years for a sector fund isn't long enough - we have a much longer timeframe to assess this funds performance v the index. And from my analysis, outperformance eroded about 1-2 years after Ed Owens left the fund.
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by grabiner » Sat Nov 30, 2019 11:16 am

livesoft wrote:
Sat Nov 30, 2019 10:39 am
retire2022 wrote:
Fri Nov 29, 2019 8:51 pm
I had this fund since Feb 2015 and it is on my list to sell right now I am waiting for the ex dividends and Dec 2019 and March 2020, my only lost is down to $1200.
What is the point of waiting for the "ex dividends"? I don't see why that would have anything to do with this decision.
Even in a taxable account, waiting for the dividend is close to break-even. When the fund pays out a dividend, its price will decline by the same amount, so your capital gain on the sale will be decreased by the amount of the dividend. If the dividend is 100% qualified and the capital gain is long-term, you break even.
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by tj » Sat Nov 30, 2019 11:21 am

If Health Care hasn't been performing lately, it woudl seem to be time to buy rather than time to sell. I remember when this fund was on fire a few years ago...folks were fans of the new manager too. It sounds like the new manager has fallen out of favor with some bogleheads.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by retire2022 » Sat Nov 30, 2019 11:51 am

grabiner wrote:
Sat Nov 30, 2019 11:16 am
livesoft wrote:
Sat Nov 30, 2019 10:39 am
retire2022 wrote:
Fri Nov 29, 2019 8:51 pm
I had this fund since Feb 2015 and it is on my list to sell right now I am waiting for the ex dividends and Dec 2019 and March 2020, my only lost is down to $1200.
What is the point of waiting for the "ex dividends"? I don't see why that would have anything to do with this decision.
Even in a taxable account, waiting for the dividend is close to break-even. When the fund pays out a dividend, its price will decline by the same amount, so your capital gain on the sale will be decreased by the amount of the dividend. If the dividend is 100% qualified and the capital gain is long-term, you break even.
Thanks grabiner, yes it is breakeven, yes I never sell at a lost, worth holding out until Dec/Mar as discussed previously.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by grabiner » Sat Nov 30, 2019 11:58 am

retire2022 wrote:
Sat Nov 30, 2019 11:51 am
grabiner wrote:
Sat Nov 30, 2019 11:16 am
livesoft wrote:
Sat Nov 30, 2019 10:39 am
retire2022 wrote:
Fri Nov 29, 2019 8:51 pm
I had this fund since Feb 2015 and it is on my list to sell right now I am waiting for the ex dividends and Dec 2019 and March 2020, my only lost is down to $1200.
What is the point of waiting for the "ex dividends"? I don't see why that would have anything to do with this decision.
Even in a taxable account, waiting for the dividend is close to break-even. When the fund pays out a dividend, its price will decline by the same amount, so your capital gain on the sale will be decreased by the amount of the dividend. If the dividend is 100% qualified and the capital gain is long-term, you break even.
Thanks grabiner, yes it is breakeven, yes I never sell at a lost, worth holding out until Dec/Mar as discussed previously.
Waiting for the dividend for a short time is break even. Waiting longer is a net loss; you expect the stock market to rise, and this will increase your capital gain. (And if the market falls, you will have a loss to harvest in your replacement fund.)
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retire2022
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by retire2022 » Sat Nov 30, 2019 12:01 pm

grabiner wrote:
Sat Nov 30, 2019 11:58 am

Waiting for the dividend for a short time is break even. Waiting longer is a net loss; you expect the stock market to rise, and this will increase your capital gain. (And if the market falls, you will have a loss to harvest in your replacement fund.)
Sorry, this is in my Roth IRA so TLH don't apply, for me it is a math exercise, in my case it is only 7.25% of entire portfolio.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by livesoft » Sat Nov 30, 2019 12:04 pm

What math exercise would that be?
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by retire2022 » Sat Nov 30, 2019 12:05 pm

livesoft wrote:
Sat Nov 30, 2019 12:04 pm
What math exercise would that be?
to breakeven $1200 in my pocket

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by livesoft » Sat Nov 30, 2019 12:07 pm

Ah, it has nothing to do with the ex-dividend dates nor with getting the dividends. It is about loss aversion I guess.

So if you sold now and what you bought with the money returned more than $1200 before VGHAX gained $1200, then that would ruin the math exercise?
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by retire2022 » Sat Nov 30, 2019 12:22 pm

livesoft wrote:
Sat Nov 30, 2019 12:07 pm
Ah, it has nothing to do with the ex-dividend dates nor with getting the dividends. It is about loss aversion I guess.

So if you sold now and what you bought with the money returned more than $1200 before VGHAX gained $1200, then that would ruin the math exercise?
Livesoft thanks for the enlightenment, will see monday whether or not I will exit, I will keep you posted.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by livesoft » Sat Nov 30, 2019 12:27 pm

It's always a guess since no one can predict the future.
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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Elysium » Sat Nov 30, 2019 1:31 pm

retire2022 wrote:
Fri Nov 29, 2019 8:51 pm
rhornback wrote:
Fri Nov 29, 2019 8:24 pm
I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!
rhornback

I had this fund since Feb 2015 and it is on my list to sell right now I am waiting for the ex dividends and Dec 2019 and March 2020, my only lost is down to $1200.

This is a active sector fund and is only 7.25% of my entire portfolio and is currently in my Roth IRA.
This is called buying high and selling low. Chances are that this fund will start outperforming 500 Index in the year you sell it. All you would have locked in then is underperformance on both ends, first with Helathcare and then with whatever else you buy in that place. Because most people who are buying high and selling low are looking at the rear view mirror, high chance they will buy what has done well recently.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by sperry8 » Sat Nov 30, 2019 2:14 pm

Elysium wrote:
Sat Nov 30, 2019 1:31 pm
retire2022 wrote:
Fri Nov 29, 2019 8:51 pm
rhornback wrote:
Fri Nov 29, 2019 8:24 pm
I am a pretty passive investor. I look at the specifics for my investments a couple times a year. I have my strategy and I stick with it. And when I do look generally it is the 5 year rate of return. IMO one year is to volatile

So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%

Vanguard Health has been a core holding for me for 20 years. I have always figured that with people living longer that Health Care would always be in demand and something that (most) people would be willing to pay a premium for.

I recognize that sector funds can be more volatile that the market indexes and if I look over the last 10 years some years for Vanguard Health some years been great and some years no so great. But that is why I generally look at the 5 year horizon and pretty much for as long as I remember Vanguard Health has been beating the S&P 500 over a 5 year period.

Any ideas on what happened? Any insights?

Thanks!
rhornback

I had this fund since Feb 2015 and it is on my list to sell right now I am waiting for the ex dividends and Dec 2019 and March 2020, my only lost is down to $1200.

This is a active sector fund and is only 7.25% of my entire portfolio and is currently in my Roth IRA.
This is called buying high and selling low. Chances are that this fund will start outperforming 500 Index in the year you sell it. All you would have locked in then is underperformance on both ends, first with Helathcare and then with whatever else you buy in that place. Because most people who are buying high and selling low are looking at the rear view mirror, high chance they will buy what has done well recently.
That is more true for indexes, even sector indexes. Since active underperforms indexes as the years go by, even if HC outperforms it is not necessarily true an active HC fund will outperform inclusive of taxes and fees. If OP truly thinks HC is set to outperform and wants to make a bet, an HC index/etf may be a better way to gain that performance.
BH contest results: 2018: #150 of 493 | 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Carl53 » Sun Dec 01, 2019 8:59 am

Held this fund or the investor version fund for 35 years. It was the second Vanguard fund we acquired. A couple of times in the first couple of decades I got caught up in all the health care hoopla news and sold some of it only to buy somewhat less back at a higher price. Currently about 10% of portfolio thanks to rebalancing practices. Hard to knock its long term return. I'd quote the exact number but Vanguard's site currently is having some problems, but believe it is north of 16% since inception.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by tibbitts » Sun Dec 01, 2019 10:00 am

sperry8 wrote:
Sat Nov 30, 2019 9:48 am
Kenkat wrote:
Sat Nov 30, 2019 9:42 am
If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time.
Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
I thought it had outperformed its index for 5 years. The problem seems to have been more recent history - and this year especially has been a disaster I guess (vs. the index.)

Oh well, some of us have this AND Energy - ugh.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by sperry8 » Sun Dec 01, 2019 11:17 am

Carl53 wrote:
Sun Dec 01, 2019 8:59 am
Held this fund or the investor version fund for 35 years. It was the second Vanguard fund we acquired. A couple of times in the first couple of decades I got caught up in all the health care hoopla news and sold some of it only to buy somewhat less back at a higher price. Currently about 10% of portfolio thanks to rebalancing practices. Hard to knock its long term return. I'd quote the exact number but Vanguard's site currently is having some problems, but believe it is north of 16% since inception.
True, it's long term return is excellent. But most of this return came in the early years when the fund was smaller and more nimble and run by its former manager Ed Owens. As the fund gathered assets (due to sig outperformance) it's returns started to sag and then when Mr Owens left returns sagged more. Today it is not the same fund as it was... those early returns you/we love so much are long gone and highly unlikely to be repeated (because the funds asset size simply doesn't allow for returns like this). Plus it could be argued the outperformance was Mr Owens prowess - rather than simply the sector he resided in. Since he no longer chooses and returns basically mirror the index (pre-tax), one should not be mislead that those long ago gains will someday reappear.
tibbitts wrote:
Sun Dec 01, 2019 10:00 am
sperry8 wrote:
Sat Nov 30, 2019 9:48 am
Kenkat wrote:
Sat Nov 30, 2019 9:42 am
If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time.
Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
I thought it had outperformed its index for 5 years. The problem seems to have been more recent history - and this year especially has been a disaster I guess (vs. the index.)

Oh well, some of us have this AND Energy - ugh.
It did beat VHT by <2% over the past 5 years but lost to it by <2% over the past 3 years. Of course, if you hold this in taxable your returns are much worse as the Active fund is not a good fund in taxable to due cap gains distributions. This makes it much worse than the index. If held in non-taxable... well, then it's at least on par (give or take).
BH contest results: 2018: #150 of 493 | 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by Elysium » Mon Dec 02, 2019 6:52 pm

sperry8 wrote:
Sat Nov 30, 2019 10:50 am
Kenkat wrote:
Sat Nov 30, 2019 9:56 am
sperry8 wrote:
Sat Nov 30, 2019 9:48 am
Kenkat wrote:
Sat Nov 30, 2019 9:42 am
If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time.
Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
Active funds will sometimes also underperform the index they track. That’s one of the risks of buying an active fund. But again, 5 years - it could be a trend or it could be random noise. It’s impossible to say. If you believe in the healthcare sector, the index would be a good choice. I held Windsor II for a long time because the index choices for value were poor, but have since switched to holding Value Index instead once Vanguard introduced the MSCI tracked indexes.
Agree re active v index. But in this fund in particular if you overlay outperformance v underperformance there is a big difference between old manager v new. Of course, there is also a big difference between the size (assets held in the fund), i.e., outperformance happened when it was smaller rather than larger. So while I agree 5 years for a sector fund isn't long enough - we have a much longer timeframe to assess this funds performance v the index. And from my analysis, outperformance eroded about 1-2 years after Ed Owens left the fund.
This really gets into active / passive discussion. I see no reason to believe some sectors may be better than others, and if even if they were, impossible anyone can predict it ahead of time. This is even more slippery than factor tilting, as there is no evidence for sector tilting. In the case of Vanguard HC fund, I think there is some legacy involved here that makes it sort of a unique fund. I don't know if this is true today, probably not, but in the past Vanguard HC fund may have had a skilled active manager, much as we do not like to admit it on BH forum, some of them do/did exist. Obviously it is impossible to have identified ahead of time, but the former manager of VG HC fund generated a lot of alpha, but that manager retired almost 10 years back. Some people here did invest originally in the fund and may have profited. My feeling is that it is gone, and since the bet was on manager skill, not on the sector tilt, there may be no more reasons to overweight HC.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by illumination » Mon Dec 02, 2019 10:44 pm

rhornback wrote:
Fri Nov 29, 2019 8:24 pm


So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%


Thanks!
So when I back tested it, the return I'm seeing from Jan 2014 to nov 2019 is 11.55%
SPY is 11.52%

https://www.portfoliovisualizer.com/bac ... ion2_2=100



What am I missing? Seems to be doing fine.

FWIW, I think health care will outperform. My investing style though is not pure Boglehead, I tend to have a smaller percentage of sector funds I speculate with. I have a bit of VHT.

I would not make a big bet on a sector fund regardless of the industry, but I tend to think some of the political/government concerns in this area are probably over blown and it's not all going to all be nationalized. Huge aging population will require a massive amount of health services. Just speculation on my part. So like under 2% of my portfolio, a pretty small wager.

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by sperry8 » Tue Dec 03, 2019 10:01 am

Elysium wrote:
Mon Dec 02, 2019 6:52 pm
sperry8 wrote:
Sat Nov 30, 2019 10:50 am
Kenkat wrote:
Sat Nov 30, 2019 9:56 am
sperry8 wrote:
Sat Nov 30, 2019 9:48 am
Kenkat wrote:
Sat Nov 30, 2019 9:42 am
If you are going to set up a portfolio that differs from the overall market, you have to be prepared for some periods of under performance. 5 years is not a very long time.
Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
Active funds will sometimes also underperform the index they track. That’s one of the risks of buying an active fund. But again, 5 years - it could be a trend or it could be random noise. It’s impossible to say. If you believe in the healthcare sector, the index would be a good choice. I held Windsor II for a long time because the index choices for value were poor, but have since switched to holding Value Index instead once Vanguard introduced the MSCI tracked indexes.
Agree re active v index. But in this fund in particular if you overlay outperformance v underperformance there is a big difference between old manager v new. Of course, there is also a big difference between the size (assets held in the fund), i.e., outperformance happened when it was smaller rather than larger. So while I agree 5 years for a sector fund isn't long enough - we have a much longer timeframe to assess this funds performance v the index. And from my analysis, outperformance eroded about 1-2 years after Ed Owens left the fund.
This really gets into active / passive discussion. I see no reason to believe some sectors may be better than others, and if even if they were, impossible anyone can predict it ahead of time. This is even more slippery than factor tilting, as there is no evidence for sector tilting. In the case of Vanguard HC fund, I think there is some legacy involved here that makes it sort of a unique fund. I don't know if this is true today, probably not, but in the past Vanguard HC fund may have had a skilled active manager, much as we do not like to admit it on BH forum, some of them do/did exist. Obviously it is impossible to have identified ahead of time, but the former manager of VG HC fund generated a lot of alpha, but that manager retired almost 10 years back. Some people here did invest originally in the fund and may have profited. My feeling is that it is gone, and since the bet was on manager skill, not on the sector tilt, there may be no more reasons to overweight HC.
Exactly what I feel about the fund. The outperformance was due to prior manager skill (yes, it happens, just infrequently and as you say, impossible to tell ahead of time). PRIMECAP managers are also skill imo. But they and the former manager of HC are outliers. Most underperform.

Thus there is no more reason to tilt.
illumination wrote:
Mon Dec 02, 2019 10:44 pm
rhornback wrote:
Fri Nov 29, 2019 8:24 pm


So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%


Thanks!
So when I back tested it, the return I'm seeing from Jan 2014 to nov 2019 is 11.55%
SPY is 11.52%

https://www.portfoliovisualizer.com/bac ... ion2_2=100



What am I missing? Seems to be doing fine.

FWIW, I think health care will outperform. My investing style though is not pure Boglehead, I tend to have a smaller percentage of sector funds I speculate with. I have a bit of VHT.

I would not make a big bet on a sector fund regardless of the industry, but I tend to think some of the political/government concerns in this area are probably over blown and it's not all going to all be nationalized. Huge aging population will require a massive amount of health services. Just speculation on my part. So like under 2% of my portfolio, a pretty small wager.
Yes, it is basically a sector that is matching the index before taxes. Re-run your analysis after taxes and watch its performance drop dramatically. Further, that performance isn't risk adjusted. Why take on sector risk just to match the S&P 500 Index returns (in a non-taxable account)? Makes no sense. And anything we/you believe about future healthcare in the US is speculation and further is priced into HC already. You think no one knows people are aging? No one knows people will require massive health spending? Of course! We all know that and it's fully priced in. So future returns will not be based on what we already know but what happens that is different from what we know.
BH contest results: 2018: #150 of 493 | 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by illumination » Tue Dec 03, 2019 1:58 pm

sperry8 wrote:
Tue Dec 03, 2019 10:01 am
Elysium wrote:
Mon Dec 02, 2019 6:52 pm
sperry8 wrote:
Sat Nov 30, 2019 10:50 am
Kenkat wrote:
Sat Nov 30, 2019 9:56 am
sperry8 wrote:
Sat Nov 30, 2019 9:48 am


Agreed (bold emphasis mine) however there are two issues here. One is that 5 years is not a long time. The other is that the active fund has not outperformed the index fund over the same 5 year period. They invest in different things (so you have to take a look at the underlying allocations) but one could make an argument that even if they decide to want to overweight this sector, the active fund is no longer the way to do it. Now if only Ed Owens would come out of retirement :wink:
Active funds will sometimes also underperform the index they track. That’s one of the risks of buying an active fund. But again, 5 years - it could be a trend or it could be random noise. It’s impossible to say. If you believe in the healthcare sector, the index would be a good choice. I held Windsor II for a long time because the index choices for value were poor, but have since switched to holding Value Index instead once Vanguard introduced the MSCI tracked indexes.
Agree re active v index. But in this fund in particular if you overlay outperformance v underperformance there is a big difference between old manager v new. Of course, there is also a big difference between the size (assets held in the fund), i.e., outperformance happened when it was smaller rather than larger. So while I agree 5 years for a sector fund isn't long enough - we have a much longer timeframe to assess this funds performance v the index. And from my analysis, outperformance eroded about 1-2 years after Ed Owens left the fund.
This really gets into active / passive discussion. I see no reason to believe some sectors may be better than others, and if even if they were, impossible anyone can predict it ahead of time. This is even more slippery than factor tilting, as there is no evidence for sector tilting. In the case of Vanguard HC fund, I think there is some legacy involved here that makes it sort of a unique fund. I don't know if this is true today, probably not, but in the past Vanguard HC fund may have had a skilled active manager, much as we do not like to admit it on BH forum, some of them do/did exist. Obviously it is impossible to have identified ahead of time, but the former manager of VG HC fund generated a lot of alpha, but that manager retired almost 10 years back. Some people here did invest originally in the fund and may have profited. My feeling is that it is gone, and since the bet was on manager skill, not on the sector tilt, there may be no more reasons to overweight HC.
Exactly what I feel about the fund. The outperformance was due to prior manager skill (yes, it happens, just infrequently and as you say, impossible to tell ahead of time). PRIMECAP managers are also skill imo. But they and the former manager of HC are outliers. Most underperform.

Thus there is no more reason to tilt.
illumination wrote:
Mon Dec 02, 2019 10:44 pm
rhornback wrote:
Fri Nov 29, 2019 8:24 pm


So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%


Thanks!
So when I back tested it, the return I'm seeing from Jan 2014 to nov 2019 is 11.55%
SPY is 11.52%

https://www.portfoliovisualizer.com/bac ... ion2_2=100



What am I missing? Seems to be doing fine.

FWIW, I think health care will outperform. My investing style though is not pure Boglehead, I tend to have a smaller percentage of sector funds I speculate with. I have a bit of VHT.

I would not make a big bet on a sector fund regardless of the industry, but I tend to think some of the political/government concerns in this area are probably over blown and it's not all going to all be nationalized. Huge aging population will require a massive amount of health services. Just speculation on my part. So like under 2% of my portfolio, a pretty small wager.
Yes, it is basically a sector that is matching the index before taxes. Re-run your analysis after taxes and watch its performance drop dramatically. Further, that performance isn't risk adjusted. Why take on sector risk just to match the S&P 500 Index returns (in a non-taxable account)? Makes no sense. And anything we/you believe about future healthcare in the US is speculation and further is priced into HC already. You think no one knows people are aging? No one knows people will require massive health spending? Of course! We all know that and it's fully priced in. So future returns will not be based on what we already know but what happens that is different from what we know.
It's why anyone "speculates", they think it offers more return than is currently priced in. You could be right or you could be wrong. I am comfortable making bets from time to time with a small portion of my portfolio.

Regarding this specific mutual fund, I thought this was the "twin" of the VHT ETF, but it's not. (it's VHCIX). So actively managed funds are something I avoid, so if this was in a retirement account, I would sell regardless. But if you believe in the sector, buy the ETF VHT or VHCIX.


My take is the industry has taken a hit from political "speculation" and I think it's vastly overblown, so I plan to stay. And so far, even after taxes, my investment in VHT has outperformed the S&P 500. Whether than continues, who knows, but I'm comfortable with the small bet and I'm glad I made it. Would I recommend someone make a huge bet with their retirement on this? Absolutely not.


Of course there's people here that think anything outside a fund like VT (total world) is heresy. :D

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Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by sperry8 » Tue Dec 03, 2019 3:19 pm

illumination wrote:
Tue Dec 03, 2019 1:58 pm
sperry8 wrote:
Tue Dec 03, 2019 10:01 am
Elysium wrote:
Mon Dec 02, 2019 6:52 pm
sperry8 wrote:
Sat Nov 30, 2019 10:50 am
Kenkat wrote:
Sat Nov 30, 2019 9:56 am


Active funds will sometimes also underperform the index they track. That’s one of the risks of buying an active fund. But again, 5 years - it could be a trend or it could be random noise. It’s impossible to say. If you believe in the healthcare sector, the index would be a good choice. I held Windsor II for a long time because the index choices for value were poor, but have since switched to holding Value Index instead once Vanguard introduced the MSCI tracked indexes.
Agree re active v index. But in this fund in particular if you overlay outperformance v underperformance there is a big difference between old manager v new. Of course, there is also a big difference between the size (assets held in the fund), i.e., outperformance happened when it was smaller rather than larger. So while I agree 5 years for a sector fund isn't long enough - we have a much longer timeframe to assess this funds performance v the index. And from my analysis, outperformance eroded about 1-2 years after Ed Owens left the fund.
This really gets into active / passive discussion. I see no reason to believe some sectors may be better than others, and if even if they were, impossible anyone can predict it ahead of time. This is even more slippery than factor tilting, as there is no evidence for sector tilting. In the case of Vanguard HC fund, I think there is some legacy involved here that makes it sort of a unique fund. I don't know if this is true today, probably not, but in the past Vanguard HC fund may have had a skilled active manager, much as we do not like to admit it on BH forum, some of them do/did exist. Obviously it is impossible to have identified ahead of time, but the former manager of VG HC fund generated a lot of alpha, but that manager retired almost 10 years back. Some people here did invest originally in the fund and may have profited. My feeling is that it is gone, and since the bet was on manager skill, not on the sector tilt, there may be no more reasons to overweight HC.
Exactly what I feel about the fund. The outperformance was due to prior manager skill (yes, it happens, just infrequently and as you say, impossible to tell ahead of time). PRIMECAP managers are also skill imo. But they and the former manager of HC are outliers. Most underperform.

Thus there is no more reason to tilt.
illumination wrote:
Mon Dec 02, 2019 10:44 pm
rhornback wrote:
Fri Nov 29, 2019 8:24 pm


So I was checking today and my Vanguard Health Care Admiral 5 year rate of return is 7.5%. Compare this to the S&P 500 which is 10.74%


Thanks!
So when I back tested it, the return I'm seeing from Jan 2014 to nov 2019 is 11.55%
SPY is 11.52%

https://www.portfoliovisualizer.com/bac ... ion2_2=100



What am I missing? Seems to be doing fine.

FWIW, I think health care will outperform. My investing style though is not pure Boglehead, I tend to have a smaller percentage of sector funds I speculate with. I have a bit of VHT.

I would not make a big bet on a sector fund regardless of the industry, but I tend to think some of the political/government concerns in this area are probably over blown and it's not all going to all be nationalized. Huge aging population will require a massive amount of health services. Just speculation on my part. So like under 2% of my portfolio, a pretty small wager.
Yes, it is basically a sector that is matching the index before taxes. Re-run your analysis after taxes and watch its performance drop dramatically. Further, that performance isn't risk adjusted. Why take on sector risk just to match the S&P 500 Index returns (in a non-taxable account)? Makes no sense. And anything we/you believe about future healthcare in the US is speculation and further is priced into HC already. You think no one knows people are aging? No one knows people will require massive health spending? Of course! We all know that and it's fully priced in. So future returns will not be based on what we already know but what happens that is different from what we know.
It's why anyone "speculates", they think it offers more return than is currently priced in. You could be right or you could be wrong. I am comfortable making bets from time to time with a small portion of my portfolio.

Regarding this specific mutual fund, I thought this was the "twin" of the VHT ETF, but it's not. (it's VHCIX). So actively managed funds are something I avoid, so if this was in a retirement account, I would sell regardless. But if you believe in the sector, buy the ETF VHT or VHCIX.


My take is the industry has taken a hit from political "speculation" and I think it's vastly overblown, so I plan to stay. And so far, even after taxes, my investment in VHT has outperformed the S&P 500. Whether than continues, who knows, but I'm comfortable with the small bet and I'm glad I made it. Would I recommend someone make a huge bet with their retirement on this? Absolutely not.


Of course there's people here that think anything outside a fund like VT (total world) is heresy. :D
Personally I don't have a problem making sector bets or even active fund bets where appropriate. I tilt small & value and also have active funds in my portfolio (VGHAX and PRIMECAP for example).

My point (perhaps not well articulated) was that there is no more reason to place a new bet on the active health care fund. I agree, if one wants to make a bet on the health care sector then the indexed ETF would be the place to do it (although we must understand that the portfolio of VGHAX differs from the ETF so it really isn't apples to apples). Perhaps one could even consider a broader based biotech ETF. My sole argument is that an active funds 25+ year performance can no longer be expected going forward. This is not your fathers fund :wink:
BH contest results: 2018: #150 of 493 | 2017: #516 of 647 | 2016: #121 of 610 | 2015: #18 of 552 | 2014: #225 of 503 | 2013: #383 of 433 | 2012: #366 of 410 | 2011: #113 of 369 | 2010: #53 of 282

Topic Author
rhornback
Posts: 137
Joined: Tue Mar 07, 2017 9:59 am

Re: Sell VGHAX Vanguard Health Care Fund Admiral?

Post by rhornback » Sun Dec 08, 2019 3:19 pm

I do not know if anyone wants to know the details of my investments but as Op I want to close out what I started.

I decided to sell our VGHAX in our IRA accounts. I liquidated these positions and bought VHCAX -Vanguard Capital Opportunity Fund Admiral Shares, VPMAX - Vanguard PRIMECAP Fund Admiral Shares, VFIAX - Vanguard 500 Index Fund Admiral Class, and VIGAX - Vanguard Growth Index Fund Admiral Shares.

At this point the risk does not equal the potential for me. And I get older I am very happy with the VFIAX - Vanguard 500 Index Fund Admiral Class. I do not need to rich fast. As long as I can keep working and keep up with the index, I will get to my number...eventually.

(Yes I know many feel strongly about the total stock market indexes etc. I do not want to argue that here).

Thank you to everyone who responded with their ideas. Together we are smarter than I am individually.

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