Index Fund Valuations

The prices to earnings ratios of the Vanguard index funds are listed in the table below. The data listed here are as of 1/31/2006. The Vanguard index funds do a very good job of replicating their respective indexes in terms of market returns, also they are a very good proxy for the numbers like P/E ratios and dividend yields for the corresponding benchmark indexes.

Fund Name	Symbol	P/E	Earnings Yield	Dividend Yield
500 Index Fund Inv	VFINX	17.1	5.84%	1.68%
Growth Index Fund Inv	VIGRX	22.9	4.36%	0.69%
Large-Cap Index Fund Inv	VLACX	17.8	5.61%	1.57%
Total Stock Mkt Idx Inv	VTSMX	18.5	5.40%	1.55%
Value Index Fund Inv	VIVAX	14.4	6.94%	2.45%
Extended Mkt Index Inv	VEXMX	25.5	3.92%	0.99%
Mid-Cap Index Fund Inv	VIMSX	21.1	4.73%	1.01%
Small-Cap Growth Index	VISGX	29.6	3.37%	0.23%
Small-Cap Index Fund Inv	NAESX	23.9	4.18%	1.07%
Small-Cap Value Index	VISVX	19.8	5.05%	1.93%
REIT Index Fund Inv	VGSIX	38	2.63%	3.74%
Emerging Mkts Stock Index	VEIEX	13.1	7.63%	-
European Stock Index Inv	VEURX	14.9	6.71%	-
Pacific Stock Index Inv	VPACX	21.8	4.58%	-

Some observations:
* Small cap index funds are richly valued.
* The broader small cap index and small cap growth index funds have P/E ratios well above 20. The small cap growth index fund has bubble like P/E ratio of 29.6.
* The small cap value index is valued at 19.8 times the earnings. In comparison, the total stock market index has P/E ratio of 18.5. Here we have an instance of value having rich valuation than blend.
* The Large cap value index remains relatively cheap to other indexes. It also has a good dividend yield of 2.45%.
* REIT index's P/E ratio is in the stratosphere.
* Pacific stock index that includes substantial holdings in Japan is not cheap either.
* Emerging markets index has the lowest P/E ratio of the group.

Data Source: The Vanguard Group