Sunday, January 13, 2008

Cumulative returns of index funds

The 3-year cumulative returns for some Vanguard index funds are listed below in the table. The cumulative returns are as of 12/31/2007, so the returns include calendar year 2005, 2006 and 2007.

These returns show that the large cap segment of the market is starting to outperform now and it is showing up in the numbers. The small value segment that has been outperforming the overall market last few years is showing the signs of slowing down and actually underperforming the overall market for last 3 years.

This reminds me of a forum which I frequently read. In this forum in the last couple of years I saw a lot of posts saying how posters were overweighing small value segment of the market in their portfolios. In the hindsight, now I think that these posters were just performance chasing. I just hope that these posters don’t abandon the small value tilt a couple of years from now and move money into some large cap index at that time. In the hindsight it looks like that the in the last 3 years or so there was ample opportunities for the investors to dollar cost average into a larger cap index fund. Instead investors were looking at enormous backward looking returns for the small value segment and pouring money into it.

Index Fund Name 3-Year Cumulative Return
500 Index Fund 27.69%
Growth Index Fund 28.95%
Value Index Fund 30.92%
Total Stock Market Index Fund 29.14%
Mid Cap Index Fund 37.22%
Small Cap Growth Index Fund 33.32%
Small Cap Index Fund 25.59%
Small Cap Value Index Fund 17.54%


1 comment:

Jack Payne said...

The surge of the mid-cap fund past the others has to be saying something. But, alas, I can't quite figure what it is saying.