Vdigx --vanguard dividend mutual fund?

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Vdigx --vanguard dividend mutual fund?

Postby Asutexan » Tue Nov 08, 2011 8:48 pm

Is it worth buying the actively managed fund at the higher expense rate? Or should i just go with the dividend ETF?

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Re: Vdigx --vanguard dividend mutual fund?

Postby ofcmetz » Tue Nov 08, 2011 10:08 pm

You really don't give much information at all.

I usually try to buy the whole market through broad based index funds. Total Stock Market Index would work for me. I also pick index when given the choice between active and passive. Not sure if this helps or not.
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Re: Vdigx --vanguard dividend mutual fund?

Postby stlutz » Wed Nov 09, 2011 12:25 am

VDIGX is kind of a quirky fund, really. I like the actively managed fund better as it's less concentrated in the top 10 holdings than the index version is.

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Re: Vdigx --vanguard dividend mutual fund?

Postby norookie » Wed Nov 09, 2011 1:13 am

Last edited by norookie on Sat Dec 10, 2011 3:36 pm, edited 1 time in total.
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Re: Vdigx --vanguard dividend mutual fund?

Postby nisiprius » Wed Nov 09, 2011 6:32 am

Asutexan wrote:Is it worth buying the actively managed fund at the higher expense rate? Or should i just go with the dividend ETF?
I assume you have already decided, for some reason, to adopt some form of "dividend stock" strategy rather than a "total market" strategy, and that you are trying to choose between Vanguard products that have the word "dividend" in the name, which are:

Vanguard Dividend Growth Fund (VDIGX), ER 0.34%--actively managed fund that's not available as an ETF

Vanguard Dividend Appreciation Index Fund Investor Shares (VDAIX), ER 0.30%--index fund also available as
Vanguard Dividend Appreciation ETF (VIG), ER 0.18%

Vanguard High Dividend Yield Index Fund Investor Shares (VHDYX), ER 0.30%--index fund also available as:
Vanguard High Dividend Yield ETF (VYM), ER 0.18%

* Your biggest thing right now is to articulate what your strategy is. You didn't say what ETF you were considering vis-a-vis VDIGX. These are three different funds with three different strategies.

* Always do the math on the expense ratio. Don't just blindly always pick the lowest number on a knee-jerk basis. These are all low numbers. If you look closely at the "cost matters" stuff--for example, the (valid) claim that cost is the only proven predictor of performance--it is mostly talking about the difference between numbers like 0.20% and 1.20%. It's the absolute difference that matters, not the ratio. 0.40% may be double the cost of 0.20%, but it's still just $20 a year on a $10,000 investment. The choice between 0.20% and 1.20% really matters. The choice between 0.20% and 0.40% only matters 1/5 as much.

* Personally, if I had to choose between a product that had a strategy that was a good fit with my own preferences, with an ER of 0.34%, and one with an ER of 0.18% that wasn't such a good fit but was sorta-kinda-broadly in the same category, I think would go with the one that suited me. I wouldn't buy a suit that didn't fit me just because it cost less. (Unless it cost a whole lot less :) )

* Read the Wiki article, ETFs versus mutual funds. It is my strong personal opinion that the differences in expense ratios are just one of many factors. The choice between a Vanguard mutual fund and the corresponding ETF is not a big deal--it's one of the least important decisions you can make. If you like ETFs anyway and are comfortable with them, by all means go with them. If you prefer mutual funds, and you need or think you may need something--like automatic investment, withdrawal, or exchanges--that you can only get with mutual funds, go with the mutual fund, after a brief pause to actually do the math on the expense ratio.

* Although past performance does not predict future results, I like to look at it anyway :) and VDIGX at least goes back to 1992, while the others are relative newcomers.

OK, you didn't ask but let's look at VDIGX relative to Total Stock Market. Before you look to the charts, what do you expect from VDIGX?

* I would personally be troubled the performance of VDIGX relative to Total Stock Market from 1995 to 2001. It looks as if you missed out on a lot of the gains of the Great Bull Market of the 1990s and I'm not so sure what you got in return. These are growth charts and of course include reinvested dividends. Over its nearly twenty years of existence, it earned about 6.9% annualized, while Total Stock Market earned about 8.0%. Maybe 6.9% is good enough?


* If you throw out the Great Bull Market years, then VDIGX did do a little better and it did show smaller dips in the downturns, but, I dunno, I dunno.


I mean, it's not like it was a bond investment, or anything. Let's look at 2008-2009 in detail:


At the bottom, Total Stock was down 50%, VDIGX was down 40%, Total Bond was up 7%.

What do you expect from VDIGX? During the twenty or so years its been in existence, did it meet your expectations? Does it live up to the claims made by "dividend stock" advocates?
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: Vdigx --vanguard dividend mutual fund?

Postby IlikeJackB » Wed Nov 09, 2011 1:49 pm

It should be noted that prior to December 6th, 2002 Vanguard Dividend Growth Fund was named Vanguard Utilities Income Fund. The fund changed its name and investment objective as of that date; the current manager of the fund has been in place since 2006.
"Do what you will, the capital is at hazard." Justice Samuel Putnam, Harvard College vs Amory, 1830. The "Prudent Man Rule."

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