Vanguard index fund investor returns

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Beginning in 2006 Morningstar has calculated dollar-weighted investor returns for the mutual funds in their database. Vanguard index fund investor returns provides a convenient means of accessing this returns data for Vanguard index funds.

Morningstar limits the data to only one share class, primarily investor shares, per fund. Morningstar reports admiral share class data only for funds--such as Vanguard's tax-managed funds and most of the sector index funds--that do not offer investor shares.

Investor return

Morningstar defines investor return as:[note 1]

Morningstar Investor Return (also known as dollar-weighted return) measures how the average investor fared in a fund over a period of time.

Investor return incorporates the impact of cash inflows and outflows from purchases and sales and the growth in fund assets. In contrast to total returns, investor returns account for all cash flows into and out of the fund to measure how the average investor performed over time.

Investor return is calculated in a similar manner as internal rate of return. Investor return measures the compound growth rate in the value of all dollars invested in the fund over the evaluation period. Investor return is the growth rate that will link the beginning total net assets plus all intermediate cash flows to the ending total net assets.

Morningstar

When using trailing dollar-weighted investor returns for fund analysis, investors must realize that the calculations are subject to end-point bias,[note 2] meaning that the results tend to be skewed by the most resent market returns. Thus investor return will be higher if recent market returns are high, and investor return will be lower if recent returns are poor.[1][2]

Morningstar supplies investor returns over 1,3,5,10, and 15 year holding periods and advises that investor returns data are more significant when viewed over the longer-term five-year, ten-year, and fifteen-year holding periods. Morningstar also finds that for funds in similar categories, investor returns for funds with higher volatility of return are lower than the returns of funds with lower volatility of return.[3].

Evidence from investor fund flows

Poor timing of investor purchases and sales of fund shares is one factor that can lead to low investor returns. Investor fund flows into stock funds (see left table), as measured by the Investment Company Institute (ICI), show that fund investors tend to have rising purchases of fund shares in rising markets, colloquially known as "buying high" and tend to liquidate shares when markets produce negative returns, colloquially known as "selling low".[note 3]

Similarly, investor fund flows into bond funds (see right table) tend to track bond fund total returns. Thus investors tend to purchase bond fund shares when bond fund total returns are high, often a result of falling interest rates that increase both bond prices and bond fund net asset values. Investors tend to sell bond fund shares when total returns are low, often a result of rising interest rates that lower both bond prices and bond fund net asset values.

Equityfundflow.jpg
Source: 2014 Investment Company Fact Book. Net new cash flow is plotted as a six-month moving average. The total return on equities is measured as the year-over-year percent change in the MSCI All Country World Daily Total Return Index.

Bondfundflow.jpg
Source: 2014 Investment Company Fact Book. Net new cash flow to bond funds is plotted as a three-month moving average of net new cash flow as a percentage of previous month-end assets. Data exclude flows to high-yield bond funds. The total return on bonds is measured as the year-over-year percent change in the Citigroup Broad Investment Grade Bond Index.

List of Morningstar investor returns for Vanguard index funds

The following lists provide links to Morningstar investor returns for Vanguard index funds. The list also includes Vanguard's index-based tax-managed funds.

U.S. equity index funds

The list tables include Vanguard U.S. equity index funds benchmarked to various index provider indexes.

CRSP benchmark index funds

Main article: CRSP equity indexes

Vanguard offers index funds, benchmarked to CRSP benchmark indexes, that cover the total U.S. market; large cap, mid cap and small cap stocks; and growth and value stocks. Note that Morningstar does not provide investor returns for the Vanguard mega cap funds.

Vanguard US CRSP index fund investor share return
Fund Morningstar link
Vanguard Total Stock Market Index link
Vanguard Large Cap Index link
Vanguard Growth Index link
Vanguard Value Index link
Vanguard Mid Cap Index link
Vanguard Mid Cap Growth Index link
Vanguard Mid Cap Value Index link
Vanguard Small Cap Index link
Vanguard Small Cap Growth Index link
Vanguard Small Cap Value Index link

S&P benchmark index funds

Morningstar provides investor returns for three of Vanguard's index funds that track S&P indexes. Vanguard offers an additional suite of S&P index exchange-traded funds, but Morningstar only provides investor return data for mutual funds[note 4]

Vanguard US S&P index fund investor share return
Fund Morningstar link
Vanguard 500 Index link
Vanguard Extended Market Index link
Vanguard Tax-Managed Small Cap link

Specialty U.S. index funds

Vanguard Specialty index fund investor share return
Fund Morningstar link
Vanguard Dividend Appreciation Index link
Vanguard High-Yield Dividend Index link
Vanguard Tax-Managed Capital Appreciation link
Vanguard FTSE Social Index link

MSCI sector benchmark index funds

Vanguard offers eleven U.S. stock market sector funds tracking indexes provided by MSCI.

Vanguard sector index fund investor share return
Fund Morningstar link
Vanguard Consumer Discretionary Index link
Vanguard Consumer Staples Index link
Vanguard Energy Index link
Vanguard Financials Index link
Vanguard Health Care Index link
Vanguard Industrials Index link
Vanguard Information Technology Index link
Vanguard Materials Index link
Vanguard REIT Index link
Vanguard Telecommunications Index link
Vanguard Utilities Index link

FTSE international benchmark index funds

Vanguard's international stock index funds track FTSE indexes.

Vanguard FTSE internatational index fund investor share return
Fund Morningstar link
Vanguard Total World Index link
Vanguard Total International Index link
Vanguard FTSE All-World ex-US Index link
Vanguard Developed Market Index link
Vanguard European Index link
Vanguard Pacific Index link
Vanguard Emerging Market Index link
Vanguard FTSE All-World ex-US Small Cap Index link

Balanced index funds

Vanguard's balanced index funds include the Vanguard retirement date and Vanguard life strategy fund of funds.

Vanguard balanced index fund investor share return
Fund Morningstar link
Vanguard Balanced Index link
Vanguard Tax Managed Balanced link
Vanguard Life Strategy Growth link
Vanguard Life Strategy Moderate Growth link
Vanguard Life Strategy Conservative Growth link
Vanguard Life Strategy Income link
Vanguard Target Retirement 2060 link
Vanguard Target Retirement 2055 link
Vanguard Target Retirement 2050 link
Vanguard Target Retirement 2045 link
Vanguard Target Retirement 2040 link
Vanguard Target Retirement 2035 link
Vanguard Target Retirement 2030 link
Vanguard Target Retirement 2025 link
Vanguard Target Retirement 2020 link
Vanguard Target Retirement 2015 link
Vanguard Target Retirement 2010 link
Vanguard Target Retirement Income link

Bond index funds

Vanguard bond index fund investor share return
Fund Morningstar link
Vanguard Short-Term Bond link
Vanguard Short-Term Government Bond link
Vanguard Short-Term Corporate Bond link
Vanguard Short-Inflation Protected Bond link
Vanguard Intermediate-Term Bond link
Vanguard Intermediate-Term Government Bond link
Vanguard Intermediate-Term Corporate Bond link
Vanguard Total Bond link
Vanguard Mortgage-Backed Securities link
Vanguard Long-Term Bond link
Vanguard Long-Term Government Bond link
Vanguard Long-Term Corporate Bond link
Vanguard Total International Bond link
Vanguard Emerging Market Government Bond link

Notes

  1. See Fact Sheet Investor Returns for a fuller discussion of how the return is calculated
  2. See Spatrick, Alan D. and Benham, Frank, Endpoint Bias (December 12, 2011), SSRN. They assess end-point bias as
    Examinations of data from only the longest period available, from inception to the present day, may suffer from endpoint bias. Statistically, endpoint bias refers to the inclusion or exclusion of data that significantly influence results. Practically speaking, endpoint bias refers to investors’ tendency to place undue significance on results for measurement periods ending in the present.

    End-point bias can be the result of changing market conditions and/or insufficient data. The paper suggests four analytical approaches to both gauge and mitigate the effects of endpoint bias:

    1. Examine the longest time period available.
    2. Examine periods that contain a variety of market and economic conditions.
    3. Examine sub-periods or calculate trimmed means.
    4. Examine the underlying drivers of asset class returns.
  3. Investor returns are often lower than mutual fund total returns. Vanguard in a white paper, Quantifying the impact of chasing fund performance, reports the following return gaps for equity styles over the 2004 - 2013 period:
    The performance gap occurs across styles by chasing fund performance 2004–2013. Source: Ferri: Avoid Being An Out-Of-Style Investor ETF.com


  4. In addition to a suite of S&P U.S stock index exchange-traded funds Vanguard also manages a suite of Russell U.S stock index exchange-traded funds. Morningstar does not provide investor returns for these funds.

See also

References

  1. How Did Investors Really Do?, Christine Benz, Morningstar, November, 13,2006, Reviewed 26 February 2015.
  2. Investor returns versus fund returns, John Ameriks, Vanguard blog, May 18, 2011, Reviewed 26 February 2015.
  3. Fact Sheet Investor Returns, Morningstar

External links

Bibliography