Is Tax-Managed Small Cap (VTMSX) an underrated fund?

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oneleaf
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Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by oneleaf » Thu Feb 15, 2018 6:10 pm

I rarely hear Tax-Managed Small Cap mentioned on this board. Instead, we always hear about the Small-Cap Index Fund or the Small-Cap Value Index Fund.

But looking at the Vanguard website, VTMSX has the highest 5-yr and 10-yr annualized return among all small cap funds. A factor regression analysis shows an annualized alpha of 1%. It also, amazingly, has a 0.39 HmL Value load, which is as valuey as most value funds. The tax management also means there has been no CG distributions, and qualified dividend percentage has hovered above 90% every year I have owned it. The expense ratio is very low, at 0.09%.

When I invested in this fund (back in 2006), I was initially attracted to the S&P 600 methodology (the index that it tracks) as well as the tax management. The index does profit screening that ends up making it have a pretty good exposure to some value and profitability factors, despite being a small cap blend fund. 12 years later, it has been my best-performing fund. I am lucky because I tax-loss-harvested out of this fund in 2008, but was lucky enough to have a chance to TLH back into it in 2009, and have been in ever since.

Curious how others feel about it. Does the S&P 600 index methodology give it an edge over other indices? I sure hope Vanguard keeps this fund around and does not merge it with the CRSP-based Small Cap Index fund.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by PFInterest » Thu Feb 15, 2018 6:27 pm

the difference between that and VSMAX for the past 12 years has been about $1400. and who knows if the past will represent the future.
it honestly doesnt matter.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Small Law Survivor » Thu Feb 15, 2018 6:33 pm

I agree - it is a fantastic fund. I've been heavily invested in it, in my taxable acct. for a long time - so long I can't remember. It has grown tremendously over that time. I like it so much I'm thinking of recommending it to my daughter as a "hold forever" fund in her small taxable account (if I can talk v. into letting her into it). Its 5/10/15 year rankings are all in top 10%.

What's not to like? $6B under assets, a mere drop in the bucket to Vanguard ... hope they don't merge it out of existence. :confused

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by whodidntante » Thu Feb 15, 2018 6:37 pm

I would expect it to have a growth tilt and that's what the Morningstar style boxes indicate. I realize that is a different methodology than a factor regression.

Style would be one concern. I don't really want to own a small cap fund, when I have so many good and cheap options for small cap value, or even small cap multi-factor now. Even if it is a certain style right now, the style could drift over time.

Regardless, I'm glad that you are a happy owner. The expenses are rock-bottom for an active fund.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by livesoft » Thu Feb 15, 2018 6:42 pm

Shhhh! Now you have ruined it for everybody who owns this fund. :)
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by grabiner » Thu Feb 15, 2018 9:13 pm

Before the development of ETFs, it was hard to have tax-efficient small-cap investment. Now, the fund isn't necessary, but if you want to invest in the S&P 600, it is still less expensive than any ETF tracking that index. And given its 100% qualified dividends, it is more tax-efficient than Vanguard Small-Cap Index by enough to cover the expense difference. Therefore, if you want to overweight small-cap blend in taxable, it is a good deal.

If you are trying to approximate the total stock market, 90% Tax-Managed Capital Appreciation and 10% Tax-Managed Small-Cap would do that, but the lower expenses of Total Stock Market are enough to cover the tax savings except in the top bracket.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by oldzey » Mon Jul 16, 2018 7:06 pm

I actually have it in my Roth IRA. I like it.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Nicolas » Mon Jul 16, 2018 7:49 pm

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Last edited by Nicolas on Wed Sep 05, 2018 7:54 pm, edited 1 time in total.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by jalbert » Mon Jul 16, 2018 8:09 pm

A factor regression analysis shows an annualized alpha of 1%. It also, amazingly, has a 0.39 HmL Value load, which is as valuey as most value funds
This more shows the lack of statistical significance and generalizability of factor regressions run on non-random, biased samples than it illuminates much about VTMSX. This nonetheless is a good fund for holding small-caps in taxable space if you are not trying to implement a value tilt for small caps. It likely is more tax efficient than IJR, but it nonetheless has not had 100% qualified dividends every year.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by vineviz » Tue Jul 17, 2018 6:36 am

jalbert wrote:
Mon Jul 16, 2018 8:09 pm
A factor regression analysis shows an annualized alpha of 1%. It also, amazingly, has a 0.39 HML Value load, which is as valuey as most value funds
This more shows the lack of statistical significance and generalizability of factor regressions run on non-random, biased samples than it illuminates much about VTMSX. This nonetheless is a good fund for holding small-caps in taxable space if you are not trying to implement a value tilt for small caps. It likely is more tax efficient than IJR, but it nonetheless has not had 100% qualified dividends every year.
The alpha does lack statistical significance, but the HmL is statistically significant (at least in the regression I ran).

Small cap stocks in general tend to have a positive loading on value, so even a "small blend" fund (like VTMSX or IJR) will have a value tilt relative to a large cap blend fund, so it's not surprising that a small cap core fund has a value bent relative to the broad market. A small cap value fund like IJS (iShares S&P Small-Cap 600 Value ETF) has an even stronger HML loading.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Whatyear? » Tue Jul 17, 2018 12:25 pm

I've owned this fund since early 2010. I think of it as my money machine :).

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by MotoTrojan » Tue Jul 17, 2018 2:10 pm

I hold the S&P600 Value through VIOV, but my 401k only has Vanguard Small-Value (CRSP index) and this Tax-Managed fund. For now I am using the SCV VG fund in 401k (will be putting 100% of Roth into VIOV to reduce the holding) but I have considered using this fund instead. Something feels wrong though about a tax-managed account in a 401k... and it isn't truly a value fund which is what my IPS calls for.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Doc » Tue Jul 17, 2018 4:05 pm

MotoTrojan wrote:
Tue Jul 17, 2018 2:10 pm
I hold the S&P600 Value through VIOV, but my 401k only has Vanguard Small-Value (CRSP index) and this Tax-Managed fund. For now I am using the SCV VG fund in 401k (will be putting 100% of Roth into VIOV to reduce the holding) but I have considered using this fund instead. Something feels wrong though about a tax-managed account in a 401k... and it isn't truly a value fund which is what my IPS calls for.
A round about way of answering the OP's question about Vanguard Tax Managed Small Cap.

MotoTrojan is using VIOV to get his small cap value. That would be great except the average daily value for that ETF is just slightly over $10k and the total assets less than $400 million. I don't like those volume numbers.

MotTrojan is using the CRSP index fund because it's his only choice in his 401k. It has something like twice the market cap of the S&P 600. I don't like that size number.

Doc is using IJS to get the S&P600 but I can't use it at Vanguard because I might fall below the "xyz" ship status. I can't swim well. :(

I really like oneleaf's choice of Vg Tax-Managed Small Cap. Hobson's choice. :(

If Vanguard moves the Tax Managed fund to the CRSP index I might be forced to move everything to Schwab. :( :(
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by kaeltor » Tue Jul 17, 2018 4:11 pm

VTSMX = VTSAX no?

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by vineviz » Tue Jul 17, 2018 4:13 pm

Doc wrote:
Tue Jul 17, 2018 4:05 pm
MotoTrojan wrote:
Tue Jul 17, 2018 2:10 pm
I hold the S&P600 Value through VIOV, but my 401k only has Vanguard Small-Value (CRSP index) and this Tax-Managed fund. For now I am using the SCV VG fund in 401k (will be putting 100% of Roth into VIOV to reduce the holding) but I have considered using this fund instead. Something feels wrong though about a tax-managed account in a 401k... and it isn't truly a value fund which is what my IPS calls for.
MotoTrojan is using VIOV to get his small cap value. That would be great except the average daily value for that ETF is just slightly over $10k and the total assets less than $400 million. I don't like those volume numbers.
That’s really a non-issue. Average daily volume isn’t a good measure of liquidity for an index ETF and, even if it was, there are other ETFs tracking the same index with more volume.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by oldzey » Tue Jul 17, 2018 4:41 pm

kaeltor wrote:
Tue Jul 17, 2018 4:11 pm
VTSMX = VTSAX no?
VTSMX is the Investor Shares class of the Vanguard Total Stock Market Index Fund, and VTSAX is the Admiral Shares class.

This post is discussing VTMSX - Vanguard Tax-Managed Small-Cap Fund Admiral Shares.

The tickers look very similar (VTMSX and VTSMX).
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by friar1610 » Tue Jul 17, 2018 4:56 pm

I used to own VTMSX and did very well with it. I eventually decided to go the 3 fund route (well, 4 as have both Total Bond Index and Short-Term Index), so I no longer own it. Great fund as I recall.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Doc » Tue Jul 17, 2018 5:11 pm

vineviz wrote:
Tue Jul 17, 2018 4:13 pm
Doc wrote:
Tue Jul 17, 2018 4:05 pm
MotoTrojan wrote:
Tue Jul 17, 2018 2:10 pm
I hold the S&P600 Value through VIOV, but my 401k only has Vanguard Small-Value (CRSP index) and this Tax-Managed fund. For now I am using the SCV VG fund in 401k (will be putting 100% of Roth into VIOV to reduce the holding) but I have considered using this fund instead. Something feels wrong though about a tax-managed account in a 401k... and it isn't truly a value fund which is what my IPS calls for.
MotoTrojan is using VIOV to get his small cap value. That would be great except the average daily value for that ETF is just slightly over $10k and the total assets less than $400 million. I don't like those volume numbers.
That’s really a non-issue. Average daily volume isn’t a good measure of liquidity for an index ETF and, even if it was, there are other ETFs tracking the same index with more volume.
IJS
Bid/Ask/Spread
165.86/ 168.03/
1.30%

VIOV
Bid/Ask/Spread
130.15/ 144.94/
10.75%

I assume these were both at market close today. Should look during the day. That said I looked at the trading of VIOV during the day a week or two ago and there were periods of time of over ten minutes with no trades. If I were to try to buy/sell that security I would get ulcers.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by WhiteMaxima » Tue Jul 17, 2018 5:24 pm

I own VTMSX in my Roth to tilt from large cap.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by jalbert » Tue Jul 17, 2018 5:32 pm

Small cap stocks in general tend to have a positive loading on value, so even a "small blend" fund (like VTMSX or IJR) will have a value tilt relative to a large cap blend fund,
It appears the profitability screen for the SP600 is a significant driver of this effect.
Last edited by jalbert on Wed Jul 18, 2018 2:01 am, edited 1 time in total.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by rob » Tue Jul 17, 2018 5:38 pm

I have to vote no not because of performance but because Vanguard might change their mind on the "Tax Management" part of the deal (as they did for the International version).... If I had it over, I would avoid all TM funds and just use the broad index funds in taxable.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by vineviz » Tue Jul 17, 2018 7:34 pm

jalbert wrote:
Tue Jul 17, 2018 5:32 pm
Small cap stocks in general tend to have a positive loading on value, so even a "small blend" fund (like VTMSX or IJR) will have a value tilt relative to a large cap blend fund,
It appears the profitable screen for the SP600 is a significant driver of this effect.
I don't think so: the core Russell 2000, S&P600, and CRSP index funds all have positive HML loadings.

https://www.portfoliovisualizer.com/fac ... sion=false

The core Russell 1000, S&P500, and CRSP large cap index funds do not.

https://www.portfoliovisualizer.com/fac ... sion=false
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by vineviz » Tue Jul 17, 2018 7:44 pm

Doc wrote:
Tue Jul 17, 2018 5:11 pm

I assume these were both at market close today. Should look during the day. That said I looked at the trading of VIOV during the day a week or two ago and there were periods of time of over ten minutes with no trades. If I were to try to buy/sell that security I would get ulcers.
I can't help you with your ulcers, but I can say (again) that average daily trading volume isn't a very useful measure of liquidity for an index ETF nor an especially good way to choose which index ETF to buy.

https://www.vanguard.nl/documents/under ... uidity.pdf
With ETFs, ADV provides only a partial indication of liquidity. That’s because unlike single shares, the supply of ETFs is open-ended. New ETF shares can be created and existing shares redeemed based on investor demand.
https://am.jpmorgan.com/blob-gim/138327 ... uidity.pdf
A common myth is that small ETFs or those with low trading volume are, by definition, illiquid. Thanks to arbitrage mechanisms that enable ETFs to continuously trade at or near intrinsic value, ETF liquidity is primarily determined by an ETF’s underlying securities. Therefore, small or thinly traded ETFs can, in fact, be highly liquid instruments.
https://www.advisorperspectives.com/art ... -liquidity
A common misconception holds that to get “best execution,” an ETF must possess significant average daily trading volume.
http://www.etf.com/etf-education-center ... nopaging=1
However, one of the key features of ETPs is that the supply of shares is flexible—shares can be “created” or “redeemed” to offset changes in demand. Primary liquidity is concerned with how efficient it is to create or redeem shares. Liquidity in one market—primary or secondary—is not indicative of liquidity in the other market.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by grabiner » Tue Jul 17, 2018 7:54 pm

Doc wrote:
Tue Jul 17, 2018 5:11 pm
IJS
Bid/Ask/Spread
165.86/ 168.03/
1.30%

VIOV
Bid/Ask/Spread
130.15/ 144.94/
10.75%

I assume these were both at market close today. Should look during the day. That said I looked at the trading of VIOV during the day a week or two ago and there were periods of time of over ten minutes with no trades. If I were to try to buy/sell that security I would get ulcers.
These are spreads when the market is closed, which is not meaningful. ETF.com tracks spreads on all ETFs, so you can see the actual issues: VIOV averages a spread of 0.09%, and IJS averages 0.07%.

With these two funds tracking the same index, VIOV benefits from IJS to get more liquidity. If you want to buy $1M worth of VIOV, a market maker should be happy to buy $1M worth of IJS for $1,000,350 (losing half the spread) and then sell an equal amount of VIOV short to you for $1,000,500, gaining from the arbitrage.
MotoTrojan is using VIOV to get his small cap value. That would be great except the average daily value for that ETF is just slightly over $10k and the total assets less than $400 million. I don't like those volume numbers.
The average daily volume is not $15,000, but 15,000 shares, which is over $2M.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Dead Man Walking » Tue Jul 17, 2018 11:20 pm

I'm surprised that no one posted performance statistics for small cap value vs this fund.

DMW

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by software » Tue Jul 17, 2018 11:32 pm

Dead Man Walking wrote:
Tue Jul 17, 2018 11:20 pm
I'm surprised that no one posted performance statistics for small cap value vs this fund.

DMW
This isn’t a small cap value fund, so why would that be meaningful?

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Dead Man Walking » Wed Jul 18, 2018 12:41 am

software wrote:
Tue Jul 17, 2018 11:32 pm
Dead Man Walking wrote:
Tue Jul 17, 2018 11:20 pm
I'm surprised that no one posted performance statistics for small cap value vs this fund.

DMW
This isn’t a small cap value fund, so why would that be meaningful?
It may show that small is more significant than value.

DMW

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by jalbert » Wed Jul 18, 2018 2:11 am

vineviz wrote:
Tue Jul 17, 2018 7:34 pm
jalbert wrote:
Tue Jul 17, 2018 5:32 pm
Small cap stocks in general tend to have a positive loading on value, so even a "small blend" fund (like VTMSX or IJR) will have a value tilt relative to a large cap blend fund,
It appears the profitable screen for the SP600 is a significant driver of this effect.
I don't think so: the core Russell 2000, S&P600, and CRSP index funds all have positive HML loadings.

https://www.portfoliovisualizer.com/fac ... sion=false
That regression shows what I’m referring to. IWN and VIOO regress to similar size loadings, but IWN and VB, which lack or have much less stringent quality loadings than VIOO, have similar value loading. Using IJR instead of VIOO enables a larger sample. And doing a 5-factor regression with quality factors shows that much of the return driven by value is absorbed into quality.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by g2morrow » Wed Jul 18, 2018 9:13 am

was considering adding small cap blend to my taxable so what 'tax advantage' would VTMSX have over VSMAX?

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Doc » Wed Jul 18, 2018 10:16 am

grabiner wrote:
Tue Jul 17, 2018 7:54 pm
These are spreads when the market is closed, which is not meaningful. ETF.com tracks spreads on all ETFs, so you can see the actual issues: VIOV averages a spread of 0.09%, and IJS averages 0.07%.

With these two funds tracking the same index, VIOV benefits from IJS to get more liquidity. If you want to buy $1M worth of VIOV, a market maker should be happy to buy $1M worth of IJS for $1,000,350 (losing half the spread) and then sell an equal amount of VIOV short to you for $1,000,500, gaining from the arbitrage.
Right, spreads with the market closed are unreliable as I indicated. They are much closer now @ ~11:00 E. But I just watch the level 2 quotes for these two ETF's. Over a five minute period (theat as long as I watched) there were no VIOV whereas the IJS volume was changing every minute.

IIRC in that prior post the poster described trying to sell 4 (hundred?) VIOV. Three executed immediately and the fourth did not execute for 30 minutes and then the market closed.

Not good.
grabiner wrote:
Tue Jul 17, 2018 7:54 pm
The average daily volume is not $15,000, but 15,000 shares, which is over $2M.
Thanks David, my bad.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Earl Lemongrab » Wed Jul 18, 2018 12:22 pm

Dead Man Walking wrote:
Tue Jul 17, 2018 11:20 pm
I'm surprised that no one posted performance statistics for small cap value vs this fund.
As is often the case, it depends on the time period. However, through most periods they're pretty close.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Earl Lemongrab » Wed Jul 18, 2018 12:28 pm

g2morrow wrote:
Wed Jul 18, 2018 9:13 am
was considering adding small cap blend to my taxable so what 'tax advantage' would VTMSX have over VSMAX?
They follow different indexes. In general the S&P 600 is smaller. If you go to the Morningstar site and look at the Portfolio tab you can compare the style boxes. VSMAX (aka NAESX/VB) has a healthy slug of midcaps that VTSMX does not. Is that good or bad for you?
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by g2morrow » Wed Jul 18, 2018 1:05 pm

Earl Lemongrab wrote:
Wed Jul 18, 2018 12:28 pm
g2morrow wrote:
Wed Jul 18, 2018 9:13 am
was considering adding small cap blend to my taxable so what 'tax advantage' would VTMSX have over VSMAX?
They follow different indexes. In general the S&P 600 is smaller. If you go to the Morningstar site and look at the Portfolio tab you can compare the style boxes. VSMAX (aka NAESX/VB) has a healthy slug of midcaps that VTSMX does not. Is that good or bad for you?
Thanks for the info. Can't say its either good or bad for me. Was just something I was looking into.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by jalbert » Wed Jul 18, 2018 5:08 pm

jalbert wrote:
Wed Jul 18, 2018 2:11 am
vineviz wrote:
Tue Jul 17, 2018 7:34 pm
jalbert wrote:
Tue Jul 17, 2018 5:32 pm
Small cap stocks in general tend to have a positive loading on value, so even a "small blend" fund (like VTMSX or IJR) will have a value tilt relative to a large cap blend fund,
It appears the profitable screen for the SP600 is a significant driver of this effect.
I don't think so: the core Russell 2000, S&P600, and CRSP index funds all have positive HML loadings.

https://www.portfoliovisualizer.com/fac ... sion=false
That regression shows what I’m referring to. IWN and VIOO regress to similar size loadings, but IWN and VB, which lack or have much less stringent quality loadings than VIOO, have similar value loading. Using IJR instead of VIOO enables a larger sample. And doing a 5-factor regression with quality factors shows that much of the return driven by value is absorbed into quality.
It should go without saying that if substantial return is attributable to quality and you don’t include quality factors in the regression, a fully correct regression model would attribute that part of the return to alpha when you eliminate the quality variables without changing the portfolio or time period of the regression.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by oldzey » Wed Jul 18, 2018 9:06 pm

MotoTrojan wrote:
Tue Jul 17, 2018 2:10 pm
I hold the S&P600 Value through VIOV, but my 401k only has Vanguard Small-Value (CRSP index) and this Tax-Managed fund. For now I am using the SCV VG fund in 401k (will be putting 100% of Roth into VIOV to reduce the holding) but I have considered using this fund instead. Something feels wrong though about a tax-managed account in a 401k... and it isn't truly a value fund which is what my IPS calls for.
Just because VTMSX (Vanguard Tax-Managed Small-Cap Fund Admiral Shares) has "tax-managed" in its name shouldn't make it feel wrong to place VTMSX in a tax-deferred or tax-advantaged account.

For example, VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) is often used in 401ks and Roth IRAs, as well as taxable accounts. The VTSAX product summary states: "The fund’s key attributes are its low costs, broad diversification, and the potential for tax efficiency." It doesn't have "tax-managed" in its name, but it is managed in a tax efficient way.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by jalbert » Thu Jul 19, 2018 12:10 am

Just because VTMSX (Vanguard Tax-Managed Small-Cap Fund Admiral Shares) has "tax-managed" in its name shouldn't make it feel wrong to place VTMSX in a tax-deferred or tax-advantaged account. 

For example, VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) is often used in 401ks and Roth IRAs, as well as taxable accounts. The VTSAX product summary states: "The fund’s key attributes are its low costs, broad diversification, and the potential for tax efficiency." It doesn't have "tax-managed" in its name, but it is managed in a tax efficient way.
There is an essential difference. The tax management of VTMSX allows the portfolio managers to give tax considerations priority over index tracking in making portfolio management decisions as appropriate. VTSAX managers do not have this latitude. VTMSX may experience more short-term index tracking error than, say IJR which is a true index fund tracking the S&P Small-cap 600. Holding VTMSX in a tax-qualified account means you get no compensating benefit for the higher tracking variance. It is a minor, but unnecessary issue given other low cost options like IJR.
Risk is not a guarantor of return.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Doc » Thu Jul 19, 2018 12:34 pm

Earl Lemongrab wrote:
Wed Jul 18, 2018 12:22 pm
Dead Man Walking wrote:
Tue Jul 17, 2018 11:20 pm
I'm surprised that no one posted performance statistics for small cap value vs this fund.
As is often the case, it depends on the time period. However, through most periods they're pretty close.
Earl Lemongrab wrote:
Wed Jul 18, 2018 12:28 pm
g2morrow wrote:
Wed Jul 18, 2018 9:13 am
was considering adding small cap blend to my taxable so what 'tax advantage' would VTMSX have over VSMAX?
They follow different indexes. In general the S&P 600 is smaller. If you go to the Morningstar site and look at the Portfolio tab you can compare the style boxes. VSMAX (aka NAESX/VB) has a healthy slug of midcaps that VTSMX does not. Is that good or bad for you?
Vanguard footnote for Vanguard Small Cap Index:
Russell 2000 Index through May 16, 2003; MSCI US Small Cap 1750 Index through January 30, 2013; CRSP US Small Cap Index thereafter.
Which time period should we look at?

Vanguard's habit of changing it's benchmarks every several years makes comparison with other funds very difficult.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by boglesmind » Thu Jul 19, 2018 5:39 pm

I am another happy, long term holder of Vg Tax-Managed Small Cap (VTMSX).
oneleaf wrote:
Thu Feb 15, 2018 6:10 pm
Curious how others feel about it. Does the S&P 600 index methodology give it an edge over other indices? I sure hope Vanguard keeps this fund around and does not merge it with the CRSP-based Small Cap Index fund.
Love it and plan to hold on to it perhaps forever :-) I too hope Vanguard doesn't merge it with another small-cap fund.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by vineviz » Thu Jul 19, 2018 5:47 pm

jalbert wrote:
Wed Jul 18, 2018 5:08 pm
It should go without saying that if substantial return is attributable to quality and you don’t include quality factors in the regression, a fully correct regression model would attribute that part of the return to alpha when you eliminate the quality variables without changing the portfolio or time period of the regression.
Actually, that probably should go without saying because there is no such thing as "a fully correct regression model".
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by jalbert » Thu Jul 19, 2018 9:16 pm

Readers can draw their own conclusion as to how correct the cited behavior would be.
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by oldzey » Thu Jul 19, 2018 10:51 pm

Qualified dividend income—2017 year-end figures:
VTMSX - Vanguard Tax-Managed Small-Cap Fund Admiral Shares (ER 0.09%): 94.09%
VIOO - Vanguard S&P Small-Cap 600 ETF (ER 0.15%): 79.71%
IJR - iShares Core S&P Small-Cap ETF (ER 0.07%): 83.19%

M* Growth Chart Comparison
from inception date of VIOO.

M* Growth Chart Comparison from inception date of IJR.
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Blythe
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Blythe » Fri Jul 20, 2018 3:39 am

I've held VTMSX since 2006 and have been very pleased with the return. I would recommend it, especially if you are in a higher tax bracket :D

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Dead Man Walking » Sat Jul 21, 2018 1:55 am

Earl Lemongrab wrote:
Wed Jul 18, 2018 12:22 pm
Dead Man Walking wrote:
Tue Jul 17, 2018 11:20 pm
I'm surprised that no one posted performance statistics for small cap value vs this fund.
As is often the case, it depends on the time period. However, through most periods they're pretty close.
Thanks for making my point. When you get in and when you get out determines most of the difference.

DMW

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by UncleBogle » Sat Jul 21, 2018 6:16 am

I really like the look of this fund. Does anyone know if there is a good corollary fund in Fidelity?(that's where my assets are.

Lastly, could someone explain the tax advantage of this fund? (It was recommended for those in a higher tax bracket)

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Earl Lemongrab » Sat Jul 21, 2018 1:30 pm

Dead Man Walking wrote:
Sat Jul 21, 2018 1:55 am
Earl Lemongrab wrote:
Wed Jul 18, 2018 12:22 pm
Dead Man Walking wrote:
Tue Jul 17, 2018 11:20 pm
I'm surprised that no one posted performance statistics for small cap value vs this fund.
As is often the case, it depends on the time period. However, through most periods they're pretty close.
Thanks for making my point. When you get in and when you get out determines most of the difference.
My point was that there were some differences but for the most part they tracked fairly closely. Which is not too surprising when you're comparing the blend and value versions of the same index.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by oldzey » Sat Jul 21, 2018 2:11 pm

M* Growth Chart comparison of VTMSX, VSMAX, VSGAX, and VSIAX - from VTMSX inception date.

Vanguard Tax-Managed Small-Cap Fund Admiral Shares (VTMSX)
Vanguard Small-Cap Index Fund Admiral Shares (VSMAX)
Vanguard Small-Cap Growth Index Fund Admiral (VSGAX)
Vanguard Small-Cap Value Index Fund Admiral (VSIAX)
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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Earl Lemongrab » Sat Jul 21, 2018 4:28 pm

To clarify, I was looking at the S&P 600 value fund, using IJS as a comparison.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by oldzey » Sat Jul 21, 2018 4:51 pm

Earl Lemongrab wrote:
Sat Jul 21, 2018 4:28 pm
To clarify, I was looking at the S&P 600 value fund, using IJS as a comparison.
M* Growth Chart Comparison of VTMSX and IJS from inception date of IJS (iShares S&P Small-Cap 600 Value ETF).
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Cash » Sun Jul 22, 2018 6:37 am

UncleBogle wrote:
Sat Jul 21, 2018 6:16 am
I really like the look of this fund. Does anyone know if there is a good corollary fund in Fidelity?(that's where my assets are.

Lastly, could someone explain the tax advantage of this fund? (It was recommended for those in a higher tax bracket)
IJR trades for free at Fidelity. I plugged in the numbers using the modified version of triceratop’s spreadsheet, and IJR would have cost me .05% more in taxes than VTMSX. Both are among the most tax efficient index funds I can find. By comparison, VTI/VTSAX would have been .2% more expensive than VTMSX.

My primary concern with VTMSX is that there is no ETF class, so it might have to distribute a capital gain one day. Using IJR avoids this possibility.

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Re: Is Tax-Managed Small Cap (VTMSX) an underrated fund?

Post by Doc » Sun Jul 22, 2018 8:54 am

Cash wrote:
Sun Jul 22, 2018 6:37 am
My primary concern with VTMSX is that there is no ETF class, so it might have to distribute a capital gain one day. Using IJR avoids this possibility.
Buried deep in the fine print in the back of the annual report there should be a table showing "undistributed" capital gains or some such wording. Compare it with some other fund(s) to get a feeling for the importance.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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