Are all Vanguard Funds an Index Fund?

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JD101
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Are all Vanguard Funds an Index Fund?

Post by JD101 » Sun Oct 22, 2017 8:04 pm

Since Vanguard is pioneer and BIG on Index funds. Are all VG funds an Index Fund? If it is an Index fund then the fund name will contain index some where, is this correct? How can you tell what index , VG index fund is mirroring? If the name doesn't contain"Index" does that mean it is not an index fund?

I believe Vanguard also offers, mutual funds. If they do, I wonder why would they offer mutual fund which by definition is an active fund.

dkview
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Re: Are all Vanguard Funds an Index Funds?

Post by dkview » Sun Oct 22, 2017 8:06 pm

No, not all vanguard funds are index funds. It'll be indicated in the fund's name if it is an index fund for most funds. You'll have to read the funds description and it'll tell you.

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Re: Are all Vanguard Funds an Index Funds?

Post by Johm221122 » Sun Oct 22, 2017 8:10 pm

JD101 wrote:
Sun Oct 22, 2017 8:04 pm
Since Vanguard is pioneer and BIG on Index funds. Are all VG funds an Index Fund? If it is an Index fund then the fund name will contain index some where, is this correct? How can you tell what index , VG index fund is mirroring? If the name doesn't contain"Index" does that mean it is not an index fund?

I believe Vanguard also offers, mutual funds. If they do, I wonder why would they offer mutual fund which by definition is an active fund.
They offer many products,they want to manage all your assets.They offer CD's,individual securities,annuities,money market funds just to name a few products
Not only do they offer active funds,some are extremely successful

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Re: Are all Vanguard Funds an Index Fund?

Post by LadyGeek » Sun Oct 22, 2017 8:18 pm

This thread is now in the Investing - Theory, News & General forum (fund info).

Update: I fixed the grammar in the thread title. "Are all Vanguard Funds an Index Funds?" to "Are all Vanguard Funds an Index Fund?"
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lack_ey
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Re: Are all Vanguard Funds an Index Funds?

Post by lack_ey » Sun Oct 22, 2017 8:30 pm

Some traditional mutual funds are index funds, and some ETFs are actively managed. Check the prospectus or fund description for more details. For Vanguard specifically, an index fund's index is listed a number of places. In the personal investor website, check the "Portfolio & Management" tab for a fund and look under "Management" and "Fund Description" to find a statement such as "Vanguard Total Stock Market Index Fund seeks to track the investment performance of the CRSP US Total Market Index [emphasis added: this is the index], which represents approximately 100% of the investable U.S. stock market and includes large-, mid-, small-, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq."

Mutual funds are not by definition active funds. There are additionally some funds that are not index funds—meaning that they don't follow a published index—that most people (including 3rd-party data sources like Morningstar) don't really consider active either, such as many of the DFA (Dimensional) funds.

Vanguard (the Vanguard Group) runs both index funds and actively managed funds. The index funds have multiple share classes, one of which is the ETF. So if for example you want Vanguard's total stock market (US market) index fund, it is available in mutual funds with tickers VTSMX and VTSAX as well as the VTI ETF. Decades ago they used to have more assets under management in their active funds than in their index funds. Nowadays the latter dwarf the former, but their actively managed funds are a big business, managing hundreds of billions (or was it around a trillion) of dollars.

Vanguard Brokerage Services offers brokerage accounts, in which you can transact in funds, stocks/ETFs, bonds, and other assets, much like at many other brokerages. They offer access to products run by other companies, not just their own, as others do. I think you're asking about the Vanguard Group thinking of Vanguard-managed funds, whereas one of the above responses mentioned products available from VBS's brokerage.
Last edited by lack_ey on Sun Oct 22, 2017 8:34 pm, edited 1 time in total.

furwut
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Re: Are all Vanguard Funds an Index Funds?

Post by furwut » Sun Oct 22, 2017 8:33 pm

I recommend reading Bogle on Mutual Funds. It completely changed my investing life.

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Re: Are all Vanguard Funds an Index Funds?

Post by nisiprius » Sun Oct 22, 2017 8:55 pm

1) Go to Vanguard.com.
2) Investing, Vanguard Mutual Funds.
3) "Browse Vanguard funds by asset class."
Notice that it says "128 matching funds."
4) Click "Filter.
5) Un-check the box that says "Index" and leave "Active" checked. "See funds."
6) Now it shows "66 matching funds," i.e. 66 actively managed funds.
7) Click "Filter," check "Index," un-check "Active," "See funds."
8) Now it shows "62 matching funds," i.e. 62 actively managed funds.

Image
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For various reasons it can get a bit more complicated than that because of questions about investor versus Admiral share classes, whether e.g. the Target Retirement funds should really be considered index funds, etc. But that's the general picture. Vanguard offers about equal numbers of index funds and actively managed funds. In part that's because many of Vanguard's bond funds are not index funds.

As far as I know, every one of Vanguard's index funds has the word "index" in its name. (Wait... may not Target Retirement...)
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nisiprius
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Re: Are all Vanguard Funds an Index Funds?

Post by nisiprius » Sun Oct 22, 2017 9:04 pm

JD101 wrote:
Sun Oct 22, 2017 8:04 pm
How can you tell what index , VG index fund is mirroring?
Go to Vanguard.com. Type a ticker symbol or fund name in to the "search the site or get a quote" box. I'm going to use VPACX. Wait for a list of choices to drop down--usually only one if you typed a ticker symbol. Click on it. That gets you to the web page describing the fund.

Click on the Portfolio and Management tab.

Image

Under the descriptive paragraph, look for the words "Learn more about this portfolio's investment strategy and policy." Click on "strategy and policy."

Image

That page, in my experience, always names the index the fund is tracking, in this case the FTSE Developed Asia Pacific All Cap Index.
I believe Vanguard also offers, mutual funds. If they do, I wonder why would they offer mutual fund which by definition is an active fund.
You're mistaken. An index fund is a kind of mutual fund.

As to why Vanguard offers both, I don't know, but they always have. They are not doctrinaire.
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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Re: Are all Vanguard Funds an Index Funds?

Post by dbr » Sun Oct 22, 2017 9:09 pm

JD101 wrote:
Sun Oct 22, 2017 8:04 pm


I believe Vanguard also offers, mutual funds. If they do, I wonder why would they offer mutual fund which by definition is an active fund.
No, index funds are index mutual funds, most definitely mutual funds. Some of them have exchange traded fund share classes. Some Vanguard funds are actively managed. Some Vanguard funds that do not explicitly track an index are very nearly index like in management, specifically most of the Treasury bond funds. Actively managed Vanguard funds are still generally very low in expense ratio and in tax generating turnover. The mantra to invest only in index funds is like all mantras over simplistic. Also Vanguard certainly offers funds that most people here would see little reason to own. Invest at Vanguard is another over simplistic mantra.

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Re: Are all Vanguard Funds an Index Funds?

Post by TD2626 » Sun Oct 22, 2017 9:26 pm

lack_ey wrote:
Sun Oct 22, 2017 8:30 pm
Some traditional mutual funds are index funds, and some ETFs are actively managed. Check the prospectus or fund description for more details.

Mutual funds are not by definition active funds. There are additionally some funds that are not index funds—meaning that they don't follow a published index—that most people (including 3rd-party data sources like Morningstar) don't really consider active either, such as many of the DFA (Dimensional) funds.

Vanguard (the Vanguard Group) runs both index funds and actively managed funds. The index funds have multiple share classes, one of which is the ETF. So if for example you want Vanguard's total stock market (US market) index fund, it is available in mutual funds with tickers VTSMX and VTSAX as well as the VTI ETF. Decades ago they used to have more assets under management in their active funds than in their index funds. Nowadays the latter dwarf the former, but their actively managed funds are a big business, managing hundreds of billions (or was it around a trillion) of dollars.

Vanguard Brokerage Services offers brokerage accounts, in which you can transact in funds, stocks/ETFs, bonds, and other assets, much like at many other brokerages. They offer access to products run by other companies, not just their own, as others do. I think you're asking about the Vanguard Group thinking of Vanguard-managed funds, whereas one of the above responses mentioned products available from VBS's brokerage.
Good points - nice post.

Yes, Vanguard has many well-respected active funds, including their Wellington, Wellesley, Primecap, Windsor, and STAR funds. (Note that Primecap is closed to most new investors and STAR is a fund of funds). Some (like Wellington) are quite old. With some of the lowest expense ratios on active funds around, and with a history of good active fund management, you could even argue that Vanguard is one of the best active fund shops in the country.

However, Vanguard is known for being a index fund pioneer and passive investing is a key focus. Further, "Use index funds when possible" is a tenant of the Boglehead philosophy. The "default" investments that Vanguard would generally put new investors in are index funds (via Target Date or Life Strategy funds, for example). The Boglehead's Three-fund portfolio uses index funds as well.

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Re: Are all Vanguard Funds an Index Funds?

Post by LadyGeek » Sun Oct 22, 2017 9:53 pm

nisiprius wrote:
Sun Oct 22, 2017 8:55 pm
1) Go to Vanguard.com.
2) Investing, Vanguard Mutual Funds.
3) "Browse Vanguard funds by asset class."
Notice that it says "128 matching funds."
4) Click "Filter.
5) Un-check the box that says "Index" and leave "Active" checked. "See funds."
6) Now it shows "66 matching funds," i.e. 66 actively managed funds.
7) Click "Filter," check "Index," un-check "Active," "See funds."
8) Now it shows "62 matching funds," i.e. 62 actively managed funds.
...
Annoyance: The page doesn't work on Firefox. If you get a stuck "Loading" message, switch to Chrome. :annoyed

Tip: During the Bogleheads Conference visit to Vanguard, I spoke with someone about the website. She acknowledged the site could use improvement and recommended using the "Feedback" link, which is at the very bottom of every page with a rotating "+" sign. Fill it in, as they might actually read the comments. I let them know. :twisted:
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Re: Are all Vanguard Funds an Index Funds?

Post by arcticpineapplecorp. » Sun Oct 22, 2017 9:58 pm

To piggyback somewhat on what others have said Vanguard offers mutual funds that are not index because they had mutual funds before the index fund was created. Bogle's S&P500 index fund was created 8/31/1976 (source: https://personal.vanguard.com/us/funds/ ... undId=0040):

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but they have an older fund than that. As has been said, they have the Wellington fund which has been around since 7/1/1929 (source: https://personal.vanguard.com/us/funds/ ... =INT#tab=0):

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Why do they still offer mutual funds that are active rather than index? Because people want them. People want to try to beat the market (or whatever index they might be up against). However, at least Vanguard's actively managed funds are both: 1. no-load (no commission) and 2. low cost.

You can see that the Wellington fund "is 70% lower than the average expense ratio of funds with similar holdings":

Image

Even Vanguard has advertised/promoted/marketed/recommended a strategy that employs both active AND index:
https://www.vanguard.com/pdf/s356.pdf
https://personal.vanguard.com/jumppage/ ... index.html
https://advisors.vanguard.com/VGApp/iip ... ivePassive

I personallly don't invest in anything that's not an index fund. But to each his/her own.
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Re: Are all Vanguard Funds an Index Funds?

Post by TD2626 » Sun Oct 22, 2017 10:07 pm

nisiprius wrote: As to why Vanguard offers both, I don't know, but they always have. They are not doctrinaire.
It's odd how things end up. Fidelity's index funds have some of the lowest expense ratios out there and last I checked Fidelity's S&P 500 index fund had more in assets under management than their Contrafund. Yet Fidelity is known for their active fund management. Vanguard, known for index funds, arguably has some of the better active funds out there - very low expense ratios for active, long track records, etc... think Wellington Admiral and Wellesley Admiral. At first glance, you'd think that buying an active fund from Vanguard or a Fidelity index fund would be like getting your Toyota serviced at a Ford dealership but it's instead closer to ..... studying the arts at MIT.

Note: I looked it up to see if they even have an arts program at MIT and it turned out they have a top ranked one. (Source: http://news.mit.edu/2017/times-higher-e ... ities-0918).

Anyway, companies can be good at stuff they aren't known for, but your mileage may vary.

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Re: Are all Vanguard Funds an Index Fund?

Post by LadyGeek » Sun Oct 22, 2017 10:14 pm

Gus Sauter's presentation at the Bogleheads Conference takes this a step further. Gus Sauter - Bogleheads 2017 Active Investing.pdf

(The link is in the wiki here: Bogleheads® 16 - Philadelphia)

Take a look at Slide 14, which further muddies the waters. There are 2 investing strategies: Indexing and "Active bets".

The only true passive indexing strategy is the Total Stock Market, which holds the entire market.

"Active bets" has two management styles: "Passive" - which actively uses sector funds ("Active passive investing") and "Active" (factors).

Wait for the conference video to be posted which will hopefully put all of this in context. It's a deep-dive beyond the OP's question, but I wanted to mention the presentation.
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Re: Are all Vanguard Funds an Index Funds?

Post by TD2626 » Sun Oct 22, 2017 10:30 pm

arcticpineapplecorp. wrote:
Sun Oct 22, 2017 9:58 pm
You can see that the Wellington fund "is 70% lower than the average expense ratio of funds with similar holdings":

Image
That's for investor shares. Although there is a 50k minimum, presumably most investors who buy the fund would eventually aim for Admiral shares, especially given the fact that Vanguard suggests that risk-tolerant, long term investors could reasonably use this as a core holding. Wellington Admiral has a 0.16% expense ratio, claimed to be 81% lower than average.

Note: I believe index funds should be the majority of an investor's portfolio. The Boglehead philosophy says that one should "Use index funds when possible". Vanguard's active offerings do sometimes interest me, but only as a small-ish component of a otherwise predominantly index-based portfolio, in part to counter "what if everyone indexed" type concerns, and in part because in my opinion, the possibility of alpha could be higher for low-fee active funds. I feel one needs international exposure and thus dislike the lack of international in Wellington and Wellesley, so I find the W&W global options intriguing - but they don't have enough of a track record yet in my opinion, given that they are just now starting to prepare to invest funds.

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Re: Are all Vanguard Funds an Index Fund?

Post by psteinx » Mon Oct 23, 2017 11:47 am

OP seems a bit unclear on some terms, and frankly, some terms have fuzzy boundaries/definitions, generally. The following are not necessarily legal definitions, but common definitions:

Mutual Fund: Pools assets from multiple investors, invests in multiple stocks, bonds or other assets. Can be active or index, or some stuff in a sort of middle ground.

Open end mutual fund versus ETF versus closed end fund:
Open end mutual funds (OEFs) trade once, at the end of the trading day. To buy, you place an order, generally to buy $X of the mutual fund, and that is executed at the end of the day, at that day's price. Some OEFs have front or back end fees, but that is somewhat rare among Vanguard's offerings.

ETFs - Similar to OEFs, but trade on exchanges, throughout the day. You pay a commission (usually), and a small-ish spread (say, at 10:04:23 EST, a given ETF has a bid of $10.56, and an ask of $10.58. That 2 cent difference is the spread - a small friction on trading it). There are mechanisms which usually keep the trading value of the ETF within 1% (often much tighter) of the value of what it holds.

Closed end funds (CEFs) - Older and less common. Trade on exchanges, but trading price may deviate much more widely from internal holdings.

Index vs. Active vs ???
Index funds attempt to follow an index - often a well known external index such as the S&P 500, but sometimes an esoteric index that you've likely never heard of, perhaps designed specifically for that fund.

Active funds buy and sell whatever the manager(s) see as most attractive. They generally try to "beat the index". They are generally significantly more expensive (management fees, etc), than index funds.

Passive funds are sort of in the middle. They don't strictly track an index, but they're not necessarily doing a lot of trading. They can be run relatively inexpensively (but some are at least moderately pricey). Many bond funds, rather than being true index funds, are passive funds, because the nature of the bond market is somewhat less conducive to indexing than stocks. (Depending on the bond segment, there are MANY more issues of bonds than of stocks).

Costs: Costs can be high or low for any given product. When we talk about costs, we don't mean the price of the shares ($22 versus $60), but rather, the management fees and other expenses passed on to investors in the fund. Index funds are GENERALLY inexpensive, active funds GENERALLY more expensive. Most (not all) ETFs are cheap. Open end funds area mixed bag - some cheap, some pricey.

===

Where to go from here?

The real meat and potatoes is in the prospectuses of the funds, but those are often dense and hard to understand, especially if you're just "window shopping". You can start with various lists and screeners, then look at product detail pages on those that appeal to you, then look at the prospectus when you get ready to pull the trigger...

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