The Vanguard Growth Index Fund: How Is It Different?



The Vanguard Growth Index Fund: Overview

The Vanguard Growth Index Fund – Investor Shares (VIGRX) is the largest fund in this review by asset size. At the end of January 2016, it was managing assets worth $46.9 billion. As of December 2015, its assets were spread across 351 holdings and included stocks of The Coca-Cola Company (KO), Philip Morris International (PM), McDonald’s (MCD), 3M (MMM), and AbbVie (ABBV), which comprise a combined 6.8% of the fund’s equity holdings.

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The Vanguard Growth Index Fund’s performance

From a purely NAV (net asset value) return standpoint, the VIGRX did well in the one-year period ended February 12, 2016, standing third among the 12 funds of this review. It maintained that ranking in January. However, 2015 was less than flattering for the fund, with its returns placing it eighth in its peer group.

Other metrics

The VIGRX’s standard deviation, or the volatility of returns, in the one-year period up until February 12 was 17.0%. This was a higher than the S&P 500’s 16.4%, but lower than the peer group’s average of 18.6%. The fund witnessed lower volatility than several of its peers in 2015 as well.

The fund’s risk-adjusted returns, calculated by the Sharpe ratio, amounted to -0.53, which meant that it was worse off than the S&P 500, which had a ratio of -0.47 for the one-year period ended February 12. For 2015, the fund’s risk-adjusted returns were not great, placing it ninth in the pack of 12 funds.

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The information ratio, calculated with the S&P 500 as the benchmark, was -0.46 for the one-year period ended February 12. The information ratio measures the fund manager’s consistency and ability to generate excess returns over a benchmark. However, we can’t evaluate a negative information ratio. For 2015, its information ratio placed it as a below-average performer, as it stood eighth among 12 funds.

A note to investors

We’d like investors to note that the VIGRX, unlike any other fund in this review, is a passively managed index fund. Therefore, its fund manager cannot take active bets and has to follow the allocation of the underlying benchmark. Due to this, we can’t compare its quantitative metrics to those of its peers, we can only present them. What we can say, though, is that investors who are not certain about investing in an actively managed product could find passive funds such as this one to be good starting points for investing into mutual funds. The fund’s comparatively low volatility could be an asset in turbulent times. In the next article, we’ll look at the Vanguard PRIMECAP Fund – Investor Shares (VPMCX).


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