Monday, March 13, 2006

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 NameSymbolP/EEarnings
Yield
Dividend
Yield
500 Index Fund InvVFINX17.15.84%1.68%
Growth Index Fund InvVIGRX22.94.36%0.69%
Large-Cap Index Fund InvVLACX17.85.61%1.57%
Total Stock Mkt Idx InvVTSMX18.55.40%1.55%
Value Index Fund InvVIVAX14.46.94%2.45%
Extended Mkt Index InvVEXMX25.53.92%0.99%
Mid-Cap Index Fund InvVIMSX21.14.73%1.01%
Small-Cap Growth IndexVISGX29.63.37%0.23%
Small-Cap Index Fund InvNAESX23.94.18%1.07%
Small-Cap Value IndexVISVX19.85.05%1.93%
REIT Index Fund InvVGSIX382.63%3.74%
Emerging Mkts Stock IndexVEIEX13.17.63%-
European Stock Index InvVEURX14.96.71%-
Pacific Stock Index InvVPACX21.84.58%-

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

5 comments:

Anonymous said...

Can you tell us where you get your P/E valuation data from? How recent is your data and how good are the sources?

Anonymous said...

Vanguard publishes this data in the middle of each month for the previous month. The data is as of 1/31/2006 and was retrived from the Vanguard website in February.

Here is the URL if you are interested: http://flagship3.vanguard.com/VGApp/hnw/FundsIndexOnly?View=EA&Sc=0

Viral said...

This is a good study .. I think it will be great if you can update this table every month/quarter.

Viral said...

This is a good study .. I think it will be great if you can update this table every month/quarter.

Dominque said...

You said that Vanguard post the p/e of their index funds every month. That's right, but not for International markets! Would you please tell me where you found the p/e for Pacific fund index (VPACX) ? Does it cover the whole index or only a cerain pourcentage of it ? If so, what pourcentage ?
Many thanks,
Dominique