Vanguard's Strategic Equity Fund and Similar Funds?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
MrCheapo
Posts: 1450
Joined: Tue Dec 22, 2020 2:43 pm

Vanguard's Strategic Equity Fund and Similar Funds?

Post by MrCheapo »

I did a 10-year review of my funds and a surprisingly good performer was the Strategic Equity Fund (https://investor.vanguard.com/investmen ... file/vseqx)

It's focused on value in small/mid-cap. I like it because:

a) It balances my large/mega-cap retirement funds.
b) It has a relatively low (for an active fund) expense ratio of 0.17%
c) It delivers capital gains so it is tax efficient in my after-tax account
d) The management seems to be stable

But it is actively managed and for that reason I'd like to diversify beyond Vanguard's offering. Are there similar funds or am I over-thinking the diversification aspect?
OldSport
Posts: 1272
Joined: Tue Jul 25, 2017 7:01 pm

Re: Vanguard's Strategic Equity Fund and Similar Funds?

Post by OldSport »

MrCheapo wrote: Tue Mar 21, 2023 4:09 pm I did a 10-year review of my funds and a surprisingly good performer was the Strategic Equity Fund (https://investor.vanguard.com/investmen ... file/vseqx)

It's focused on value in small/mid-cap. I like it because:

a) It balances my large/mega-cap retirement funds.
b) It has a relatively low (for an active fund) expense ratio of 0.17%
c) It delivers capital gains so it is tax efficient in my after-tax account
d) The management seems to be stable

But it is actively managed and for that reason I'd like to diversify beyond Vanguard's offering. Are there similar funds or am I over-thinking the diversification aspect?
I have some of this in tax advantaged space.
User avatar
retired@50
Posts: 12709
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Vanguard's Strategic Equity Fund and Similar Funds?

Post by retired@50 »

MrCheapo wrote: Tue Mar 21, 2023 4:09 pm ... I like it because:

c) It delivers capital gains so it is tax efficient in my after-tax account
Item c) above is typically considered to have a negative tax impact because index funds don't generally deliver capital gain distributions at all. So, the overall tax cost of this fund is higher, on a relative basis.

Morningstar rates the 3-Year Tax Cost Ratio for the fund at 2.61, while the average fund for the category has a lower tax cost rating of 1.48.

In other words, those annual ST and LT capital gains distributions aren't seen as an efficiency. It's really just more "forced income" which many investors seek to avoid.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
tibbitts
Posts: 23589
Joined: Tue Feb 27, 2007 5:50 pm

Re: Vanguard's Strategic Equity Fund and Similar Funds?

Post by tibbitts »

MrCheapo wrote: Tue Mar 21, 2023 4:09 pm I did a 10-year review of my funds and a surprisingly good performer was the Strategic Equity Fund (https://investor.vanguard.com/investmen ... file/vseqx)

It's focused on value in small/mid-cap. I like it because:

a) It balances my large/mega-cap retirement funds.
b) It has a relatively low (for an active fund) expense ratio of 0.17%
c) It delivers capital gains so it is tax efficient in my after-tax account
d) The management seems to be stable

But it is actively managed and for that reason I'd like to diversify beyond Vanguard's offering. Are there similar funds or am I over-thinking the diversification aspect?
I used to invest in this and understand the motivation for using it, but would absolutely never use it in a taxable account.
Northern Flicker
Posts: 15288
Joined: Fri Apr 10, 2015 12:29 am

Re: Vanguard's Strategic Equity Fund and Similar Funds?

Post by Northern Flicker »

MrCheapo wrote: Tue Mar 21, 2023 4:09 pm I did a 10-year review of my funds and a surprisingly good performer was the Strategic Equity Fund (https://investor.vanguard.com/investmen ... file/vseqx)

The Strategic Equity Fund (midcap) and Strategic Smallcap Equity Fund are quantitatively managed portfolios. Outperformance is not a slam dunk:

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

I think the following is a better benchmark for the midcap one:

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

As noted above, capital gains distributions are just a tax drag for a stock fund in a taxable account, not a benefit.
Post Reply