Vanguard versus Vanguard: VFIAX versus VOO

My prior post comparing Vanguard's S&P 500 fund to their ETF did not address a simple head-to-head comparison USING VANGUARD's OWN DATA. It also did not compare the VFIAX Admiral fund to the VOO which invests in the Admiral fund, or at least has the same 0.04% expense ratio.

Well here are the results:

VFIAX (NAV)
as of 9/30/2017

Returns
Quarter-end   4.48%
Year-to-date  14.20%

Average Annual Returns
1 year    18.57%
3 year    10.78%
5 year    14.18%
10 year    7.43%

Risk and volatility

Standard deviation
3 year     10.07%
5 year      9.55%
10 year   15.14%

VOO (Market Price)
as of 9/30/2017

Returns
Quarter-end   4.46%
Year-to-date  14.11%

Average Annual Returns
1 year    18.59%
3 year    10.75%
5 year    14.18%
10 year    -

Risk and volatility

Standard deviation
3 year     10.07%
5 year      9.55%
10 year   15.14%

The results are virtually the same. Which is a triumph of ETF minimal tracking error.

Investors can receive ETF benefits of custody (keeping your money at one broker, if you want-a questionable benefit at best) and market hours trading (also questionable especially with index funds) without giving up return.

Disclaimer: The above is not investment advice, is for information purposes only, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.

VTSAX v VFIAX

Here we go again, this time comparing two Vanguard index mutual funds, the Admiral Class Total Stock Market Fund, VTSAX versus Vanguard's Admiral Class S&P 500 Index Fund, VFIAX.

If you ever studied finance in B-school, or anywhere for that matter, portfolio theory was all about stocks versus bonds versus cash. Well, before the Vanguard Total Stock Market Investor Fund was created on 4/27/1992, nobody could ever buy the entire stock market asset class. Since then, you can. Same with bonds and you always had cash.

Both funds come in Admiral and Investor Class shares as well as institutional classes, as do other Vanguard index funds. We are going to compare the Admiral classes this time. But, fyi, key differences are: Admiral shares have a later inception date of 11/13/2000, a $10,000 minimum investment and 0.04% expense ratio versus much earlier inception dates, $3,000 minimum and 0.15% expense ratio for Investor shares.

Since they are both Vanguard funds we can get the numbers directly from Vanguard. Here they are:

Annualized Returns (reported by Vanguard as of 9/30/2017)

                             VTSAX       VFIAX
Quarter-end             4.54%         4.48%
Year-to-date           13.95%       14.20%
1-Year                    18.63%       18.57%
3-Year                    10.69%       10.78%
5-Year                    14.18%       14.18%
10-Year                    7.69%         7.43%
Since Inception        6.41%         5.81%

Dividend Yield         1.84%         1.93%

3-Year Std. Dev.     10.32%       10.13%
Sharpe Ratio               .84              .90

Top 10 Stocks are the same for both funds.
Total # Stocks          3607             512
Top 10 Stocks*          17%           20.5%
AUM**                   $174.5B     $212.6B

I computed the correlation of daily returns since inception to be an indistinguishable 99.6%.

Ok, so whats the difference between these two funds?

-Not much, with little that matters to investors.
-VTSAX includes the small stocks not in the S&P 500.
-Small stocks are more volatile than large stocks.
-Small stocks have lower dividends than large stocks.
-Small stocks have sometimes higher returns than large stocks.
-All three effects account for the slight differences in fund performance.
-The Total Stock Market Index is arguably more academically correct in that portfolio theory likes to own the whole market and not pick winners and losers.

* Top 10 Stocks as percentage of AUM
**AUM = Assets Under Management

Disclaimer: This blog is not investment advice, is for information purposes only, may be subject to change without notice, and while prepared with care, may be subject to omissions and errors.