Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

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SmyleBogle
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Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by SmyleBogle » Tue Jan 14, 2020 2:52 pm

Hello,

I have limited options in my Vanguard 401K through my employer.

I looked at the performance of mutual funds and VIGAX performance is the best amongst all selections.

I do check the performance of mutual funds on a weekly basis and make sure things look okay.

I understand many on this forum recommend 3 funds strategy, but am I doing something really long by going all-in on VIGAX ? Performance: https://finance.yahoo.com/quote/VIGAX/performance/

I do understand that a downturn or calamity can happen anytime and the market can tank, along with the fund, but I am generally okay with the risk (in my mid 30's) That being said, I would love to hear your viewpoints and thank you for your advice.

retired@50
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by retired@50 » Tue Jan 14, 2020 3:04 pm

SmyleBogle wrote:
Tue Jan 14, 2020 2:52 pm
Hello,

I have limited options in my Vanguard 401K through my employer.

I looked at the performance of mutual funds and VIGAX performance is the best amongst all selections.

I do check the performance of mutual funds on a weekly basis and make sure things look okay.

I understand many on this forum recommend 3 funds strategy, but am I doing something really long by going all-in on VIGAX ? Performance: https://finance.yahoo.com/quote/VIGAX/performance/

I do understand that a downturn or calamity can happen anytime and the market can tank, along with the fund, but I am generally okay with the risk (in my mid 30's) That being said, I would love to hear your viewpoints and thank you for your advice.
To allow the forum to evaluate your strategy, we'd need to see the other potential choices in your 401k plan.

If you're offered VIGAX, the "Large Growth Index", what else are you offered?

Further, you appear to be basing your entire decision on past performance. This isn't smart, and it focuses your stock holdings to one corner of the entire stock market.

Regards,
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

rkhusky
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by rkhusky » Tue Jan 14, 2020 3:41 pm

Vanguard has the following on their pages which mention performance:
The performance data shown represent past performance, which is not a guarantee of future results.
Many times the hot stock or fund from last year, will be the loser the next year.

The Callan Periodic Table of Investment Returns shows how the ranking of different stock categories changes year to year:
https://www.callan.com/periodic-table/
https://www.bogleheads.org/wiki/Callan_ ... nt_returns
See if you can predict the order for 2020!

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Brianmcg321
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by Brianmcg321 » Tue Jan 14, 2020 3:58 pm

Past performance is not indicative of future results.

List all the rest of your funds by name and give us the expense ratios.

There are probably some others that you can use also.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.

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SmyleBogle
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by SmyleBogle » Wed Jan 15, 2020 2:27 pm

Thank you for all your insights.

Callan periodic table was eye-opening.

Majority of my 401K is split between:

VIGAX: https://finance.yahoo.com/quote/VIGAX/performance/

VMGMX: https://finance.yahoo.com/quote/VMGMX/p ... ce?p=VMGMX

snailderby
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by snailderby » Wed Jan 15, 2020 2:32 pm

What other options do you have in your 401k, and what are the expense ratios for each option?

carmonkie
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by carmonkie » Wed Jan 15, 2020 3:55 pm

VIGAX and VIIIX (The Vanguard S&P fund in my 401(k)) are highly correlated. @280 stocks VIGAX in holdings it is fairly well diversified, but 10 holdings represent 40% of the assets.
Backtesting VIGAX vs VIIIX even in 2008-2009, they have performed just about the same. One could argue that this would could be a suitable substitute for a S&P 500 fund. ER is just 0.05

Top 10 holdings =40% of fund assets.
Microsoft Corp.
Apple Inc.
Alphabet Inc.
Amazon.com Inc.
Facebook Inc.
Visa Inc.
Mastercard Inc.
Home Depot Inc.
Comcast Corp.
Boeing Co.

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ruralavalon
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by ruralavalon » Wed Jan 15, 2020 3:57 pm

SmyleBogle wrote:
Tue Jan 14, 2020 2:52 pm
Hello,

I have limited options in my Vanguard 401K through my employer.

I looked at the performance of mutual funds and VIGAX performance is the best amongst all selections.

I do check the performance of mutual funds on a weekly basis and make sure things look okay.

I understand many on this forum recommend 3 funds strategy, but am I doing something really long by going all-in on VIGAX ? Performance: https://finance.yahoo.com/quote/VIGAX/performance/

I do understand that a downturn or calamity can happen anytime and the market can tank, along with the fund, but I am generally okay with the risk (in my mid 30's) That being said, I would love to hear your viewpoints and thank you for your advice.
What other funds are offered? Please give fund names, tickers and expense ratios.

Vanguard Growth Index Fund Admiral Shares (VIGAX) is a good fund. But do NOT select a fund based on recent past performance. The best performing fund changes from year to year, and is not predictable.

Please see this table: "Callan periodic table of investment returns". That table shows annual returns for nine fund types ranked best to worst over the years 1999-2018 (20 years). There is no pattern, it is random.
The rankings change every year, thereby demonstrating two key principles of investing:
(1) diversification: by owning the entire market (all of the asset classes), susceptibility to changes in market returns is minimized.
(2) past performance does not predict future performance.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

mcraepat9
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by mcraepat9 » Wed Jan 15, 2020 4:10 pm

Choosing VIGAX because it has better recent performance is a classic mistake - most of large growth's outperformance over the last few years has been attributable to Apple, Google, Facebook and Amazon. You'd be buying high and hoping it goes even higher.
Amateur investors are not cool-headed logicians.

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SmyleBogle
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by SmyleBogle » Wed Jan 15, 2020 5:31 pm

Thanks, is it wrong to sell VIGAX if it starts dipping and buy a replacement fund that is high performing (within limits, not buying / selling everyday but if market tanks, move money to cash)?

If a fund has been reasonably performing over past 1, 3, 5, 10 years, is it a good indicator. I agree that past performance is not a guarantee, but then my option is to buy total market to reduce probability of failure.

I try to check on funds' performance fairly regularly.

Apologies if this sounds like a naive strategy, trying to learn as I go along.

To answer what other funds are available, most other funds are non Vanguard with high expense ratio (> 0.5 %).

anil686
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by anil686 » Wed Jan 15, 2020 5:57 pm

SmyleBogle wrote:
Wed Jan 15, 2020 5:31 pm
Thanks, is it wrong to sell VIGAX if it starts dipping and buy a replacement fund that is high performing (within limits, not buying / selling everyday but if market tanks, move money to cash)?

If a fund has been reasonably performing over past 1, 3, 5, 10 years, is it a good indicator. I agree that past performance is not a guarantee, but then my option is to buy total market to reduce probability of failure.

I try to check on funds' performance fairly regularly.

Apologies if this sounds like a naive strategy, trying to learn as I go along.

To answer what other funds are available, most other funds are non Vanguard with high expense ratio (> 0.5 %).
I would recommend some of the recommended reading from Bogle - Little Book of Common Sense Investing and Common Sense on Mutual funds. There is nothing inherently wrong with going with the growth index - over long periods of time, it will likely mirror the sp500. Thinking you will be able to *time* getting in and out of a fund and into another fund is a mistake that many investors make. it is one of the primary reasons most investors trail total market returns.

Example - the nifty 50 growth stocks in the late 1960s were very pricey and buying that portfolio and letting it sit through the downturn of the 1970s and throughout the 1980s resulted in a performance almost identical to the SP500. but that is buying and holding that fund through thick and thin. Trying to time selling and buying has long been known to be a loser’s game based on research.

So in summary - nothing wrong with the growth index only, understand that at times it will lag the market (sometimes - like in the dot com bubble aftermath really struggle esp against value) and other times (like now) will lead the market. But if you do that - don’t switch in and out - ride it for the long term. JMO though...

averagedude
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by averagedude » Wed Jan 15, 2020 6:15 pm

This is the classic mistake that 401k investors make. It is called performance chasing. This is one of the mistakes I made years ago in my 401k. I substituted the 500 index for the Fidelity Megellan fund. It had great 10 year returns in the past when I made my elections, but had horrible returns (compared to the 500 index) afterwards. Most investors have made this mistake in their investing lifetime, and I would encourage you not to make the same mistake.

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ruralavalon
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by ruralavalon » Wed Jan 15, 2020 7:19 pm

SmyleBogle wrote:
Wed Jan 15, 2020 5:31 pm
Thanks, is it wrong to sell VIGAX if it starts dipping and buy a replacement fund that is high performing (within limits, not buying / selling everyday but if market tanks, move money to cash)?
How do You predict that a dip is preclude to a crash, rather than just a pause in an upward trend?

Selling after a crash guarantees that you are selling low. You should want to sell high.


SmyleBogle wrote:
Wed Jan 15, 2020 5:31 pm
If a fund has been reasonably performing over past 1, 3, 5, 10 years, is it a good indicator. I agree that past performance is not a guarantee, but then my option is to buy total market to reduce probability of failure.

I try to check on funds' performance fairly regularly.

Apologies if this sounds like a naive strategy, trying to learn as I go along.
"There is a large amount of research showing that typical mutual fund investors actually perform far worse than the mutual funds they invest in because they tend to buy after a fund has done well and tend to sell what they own when it has done poorly. Studies on timing using returns data show no evidence of positive timing. The vast majority of investors earn less than the market due to two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market. This behavior of buy high, sell low is guaranteed to produce poor results."

Please see the wiki article "Bogleheads® investment philosophy", in particular the sections on diversification, market timing, and stay the course, and the references given.


SmyleBogle wrote:
Wed Jan 15, 2020 5:31 pm
To answer what other funds are available, most other funds are non Vanguard with high expense ratio (> 0.5 %).
For an answer to what fund might be better you need to list the funds offered. We can't guess what the other choices are.

Please give fund names, tickers and expense.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by KyleAAA » Wed Jan 15, 2020 7:35 pm

SmyleBogle wrote:
Wed Jan 15, 2020 5:31 pm
Thanks, is it wrong to sell VIGAX if it starts dipping and buy a replacement fund that is high performing (within limits, not buying / selling everyday but if market tanks, move money to cash)?
Yes, that would be a poor strategy. The fund you mention is okay, but you would probably be better off with a total market fund or something that approximates it. Post the rest of your 401k options if you want good advice. It's okay if the other options are not from Vanguard or have higher expense ratios.

snailderby
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by snailderby » Wed Jan 15, 2020 7:48 pm

1. One study found that funds that performed better over the last few years tended to perform worse--on average--going forward. I think this was true with 1, 3, and 5 year lookback periods. I'm not sure if the result would be different with longer lookback periods.

2. Morningstar has stated that a fund's expense ratio is the most proven predictor of future returns.

3. What other fund options do you have in your 401k?
Last edited by snailderby on Wed Jan 15, 2020 7:57 pm, edited 1 time in total.

retired@50
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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by retired@50 » Wed Jan 15, 2020 7:54 pm

snailderby wrote:
Wed Jan 15, 2020 7:48 pm
3. What other fund options do you have in your 401k?
Evidently, they are a secret...???

Regards,
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by ruralavalon » Wed Jan 15, 2020 8:08 pm

. . . but then my option is to buy total market to reduce probability of failure.
. . . . .
To answer what other funds are available, most other funds are non Vanguard with high expense ratio (> 0.5 %).
There are non-Vanguard funds with expense ratios > 0.50% which are worth using.

Example: Dodge & Cox Stock (DODGX) ER 0.52%. Please see: Morningstar (9/6/2019), "Be Thankful That You Don't Compete Against Vanguard"; and Portfolio Visualizer, 1993-2019.

Vanguard Growth Index Fund Admiral Shares (VIGAX) hardly did any better than Vanguard Total Stock Market Index Fund Investor Shares (VTSMX).

I would have been thrilled to find Dodge & Cox Stock (DODGX) ER 0.52% in my 401k plan.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by harvestbook » Wed Jan 15, 2020 9:26 pm

ruralavalon wrote:
Wed Jan 15, 2020 8:08 pm


Vanguard Growth Index Fund Admiral Shares (VIGAX) hardly did any better than Vanguard Total Stock Market Index Fund Investor Shares (VTSMX).

I would have been thrilled to find Dodge & Cox Stock (DODGX) ER 0.52% in my 401k plan.
If you backtest to 2009 instead, DODGX trailed VIGAX by nearly 20 percent, so it's the same kind of problem of guessing what's going to do well and when.
I'm not smart enough to know, and I can't afford to guess.

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Re: Invest in 1 Vanguard Fund - VIGAX -- Is it wrong ?

Post by ruralavalon » Thu Jan 16, 2020 1:40 pm

harvestbook wrote:
Wed Jan 15, 2020 9:26 pm
ruralavalon wrote:
Wed Jan 15, 2020 8:08 pm


Vanguard Growth Index Fund Admiral Shares (VIGAX) hardly did any better than Vanguard Total Stock Market Index Fund Investor Shares (VTSMX).

I would have been thrilled to find Dodge & Cox Stock (DODGX) ER 0.52% in my 401k plan.
If you backtest to 2009 instead, DODGX trailed VIGAX by nearly 20 percent, so it's the same kind of problem of guessing what's going to do well and when.
We use Vanguard Total Stock Market Index Fund (VTSAX) for our U.S.stock allocation.

OP likes Vanguard Growth Index Fund in his employer's 401k plan because of it's performance.

The inception of Vanguard Growth Index Fund was 1993, that gave the longest possible comparison. Why should a long-term investor choose a much shorter time period to compare?

The issue is what U.S.stock fund to use in a 401k plan, OP needs to look at what else is offered other than Vanguard Growth Index Fund. My points to OP were:
1) total stock market has done about as well as Vanguard Growth Index Fund long-term; and
2) in a 401k, where choices are limited, don't dismiss out of hand non-Vanguard funds with expense ratios > 0.50%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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