2017 Commodity Index Returns

After a summer swoon, commodity indexes recovered and finished 2017 unchanged to slightly up on the year.

VISTA= the Vista Commodity Excess Return Index

BCOM = the Bloomberg Commodity Excess Return Index

GSCI = the S&P GSCI Commodity Excess Return Index

The annual returns and standard deviation of annual returns since the 4/30/2009 inception of the Vista Index are presented in the table below. Returns are all continuously compounded. 

Returns VISTA BCOM GSCI         *2009 23.1% 23.0% 24.7% 2010 22.9% 15.4% 8.5% 2011 -4.1% -14.4% -1.2% 2012 1.5% -1.2% 0.0% 2013 -12.3% -10.1% -1.3% 2014 -19.3% -18.7% -40.2% 2015 -21.2% -28.4% -39.9% 2016 10.8% 10.8% 10.4% 2017 2.8% 0.7% 4.7% 3 Year -2.5% -5.6% -8.3% 5 Year -7.8% -9.1% -13.3% Standard Deviation 3 Year 13.6% 16.6% 22.5% 5 Year 12.6% 13.8% 22.2%

Since inception, Vista has beaten the BCOM 6 out of 8 years and the GSCI for 5 out of 8 years.  Vista's 3 and 5 year average returns beat them again, with strong margins.  Of note, Vista shows considerably less risk than either the BCOM or the GSCI.

Commodity returns for 2017 are shown in the following chart:

Of the fifteen commodity components within the Vista Commodity Index, seven, nearly half, ended the year with gains. Soybeans were the strongest performer up over 20%, while Frozen Concentrated Orange Juice was the weakest with a +30% decline.  

Conclusion

With any luck, 2018 can be a turning point for the commodity market building on the gains of the last two years. As low interest rates and low inflation give way to stimulus and increasing worldwide demand, commodities should gain a bid. Considering the all-time highs of most other markets, commodities may now be a timely investment.

Feel free to post comments.

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

Holding Period Returns

Stock indexes rising to new highs, again, in 2017 as they have since their inception, has somehow become controversial. Many voices, mainly by active managers on Wall St., have risen against stock indexes. The chorus is cautioning investors against index funds. This post will examine the returns and risks of stock indexes in more depth.

VFINX

As usual, let's start with the index you can buy, the Vanguard Investor Class S&P 500 Index Fund, VFINX:

Note there is a long history of new highs in the index, the Yahoo data begins in 1980. Note also there are ups and downs, its not a straight line up.

Holding Periods

This begs the question: what happens to investors when you buy the index? What is one's risk? What can one expect? To properly answer this question lets look at returns for a wide range of holding periods. A holding period assumes you buy the stock, hold it for the period, and then sell it.

What holding periods do we measure? Lets go with the standard set: 1 month, 3 month, 6 month, 1 year, 3 year, 10 year etc. etc. Here are the results:

The frequency chart above shows, for example, that VFINX had positive returns for a little over 60% of all 1 month holding periods. There are 9553 1 month holding periods since 1980, 6094 had gains, 3459 had losses.

Note that as we increase the holding period, the percentage of losses decline. This is expected in any bull market. Thus, historically, since 1980, 5529 3 month holding periods have had gains!

Below are the average ANNUALIZED returns for each holding period shown.

This data, we have to remember, starts with 1980 to present, an extraordinarily bullish period for equity markets. This includes the 300% gains of the Obama period and the +20% gains today. 

The table below shows the expected TOTAL RETURN and risk for short-term and long-term holding periods.

	1mo	3mo	6mo	1 yr
Average	0.8%	2.5%	5.0%	9.9%
Std. Dev.	4.6%	7.6%	11.0%	16.1%
Maximum	21.3%	34.1%	40.6%	54.4%
Minimum	-35.5%	-51.4%	-61.2%	-64.4%

3 yr 5 yr 10 yr 15 yr 20 yr 30 yr Average 30.0% 49.5% 104.0% 153.1% 201.9% 298.6% Std. Dev.  27.6% 35.4% 50.6% 56.2% 31.8% 11.5% Maximum 86.2% 125.2% 196.6% 263.9% 289.1% 331.3% Minimum -58.1% -43.0% -24.2% 53.1% 140.2% 262.2% Conclusion In any give year, investors have roughly a 40% risk of loss and 60% chance of gain. Yearly losses can easily exceed 20% (2 standard deviations) with an extreme of -60% in any given year.  This is why short-term investing is so risky!  5 year holding periods cut the extreme to a 40% risk of loss and the numbers only get better with time. Feel free to post comments. 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.

How MANY New Highs since the election?

Stock market new highs have been touted in the political press. There have been claims of superior market performance under the current President. Lets examine this claim using the Yahoo adjusted closing prices of Vanguard's Investor Class S&P 500 Index Fund, VFINX.

Starting with election day to yesterday's close, we have the following results:

11/8/2016 Closing Price: 194.1598

12/14/2017 Closing Price: 245.8000

Number of Trading Days: 277

Number of New Highs: 76

Total Return: 23.5%

These look like great results and have been touted as such by the President and his supporters.

Let's look at, in fairness, the same period for the previous Presidential election.

11/7/2012 Closing Price: 116.9041

277 Trading Days After Election, 12/12/13 Closing Price: 152.2273

Number of New Highs: 69

Total Return: 24.09%

Another interesting comparison are the quarterly GDP growth rates.

If nothing else, these comps puts many claims in perspective. 

Feel free to post comments.

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.

Commodity Indexes

The broad-based Vista Commodity Index™ of 15 diversified commodity futures was unchanged to 3 decimal places in November and to two decimal places for 11/30/2017 year-to-date. The Bloomberg  (BCOM, formerly Dow Jones-UBS) and S&P GSCI commodity indexes, down 2.09% and up 0.05%, respectively, were likewise mired in the low inflation, low demand world environment.

Returns of the 15 commodities composing the Vista Commodity index show the dismal results.

Copper was the leader as it benefitted from its traditional correlation to housing and the stock market, both sharply up for the period. Softs were down across the board, energy was lackluster and gold is up less than 10%. The rise in this year's demand was wholly offset by aggressive suppliers.  The outlook for commodities will rise and fall with world demand and the ability of suppliers and technology to keep up or fall off.

Feel free to post comments.

Disclaimer: All product names, logos, and brands are property of their respective owners. All company, product and service names used in this website are for identification purposes only. Use of these names, logos, and brands does not imply endorsement. 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.

Russell 2000 IWM and TNA

After looking at the Nasdaq, lets jump right into the iShares Russell 2000 ETF (IWM) and its triple-leveraged cousin the Direxion Daily Small Cap Bull 3X ETF (TNA). We will compare these to the SPY.

TNA, like all the other leveraged broad-based ETFs, has been on fire for years. The 3X variety has been triple on fire.  As with the other 3X funds, TNA is marketed as a short term vehicle with the goal of delivering, for a day, 3X the return of the Russell 2000 index of small cap stocks. Brokers caution individual investors with higher margin requirements for these kind of ETFs.

IWM, the largest Russell 2000 ETF began trading 5/26/2000. The TNA inception date is 11/19/2008. For fair comparisons our analyses begin with the TNA start date. Here are the results.

IWM and SPY look like straight lines compared to TNA.
Continuously compounded returns follow:

Annualized Returns
as of 12/1/2017
	TNA	IWM	SPY
1 month	94.8%	34.3%	31.6%
3 month	99.0%	35.1%	27.9%
6 month	51.1%	19.3%	17.9%
1 year	43.3%	17.0%	20.6%
3 year	21.5%	10.6%	10.2%
5 year	32.3%	13.9%	14.5%
Since TNA Inception	26.1%	14.4%	13.7%

*Since TNA Inception 11/19/2008 to 12/31/2008 **Year-to-date 12/1/2017 TNA IWM SPY Avg. Ann'l Returns 26.1% 14.4% 13.7% St. Dev. of Ann'l Returns 37.4% 11.8% 7.9%

Risk and Reward
as of 12/1/2017
	TNA	IWM	SPY
3 year mean	21.5%	10.6%	10.2%
3 year standard deviation	42.2%	13.8%	9.6%
5 year mean	32.3%	13.9%	14.5%
5 year standard deviation	33.4%	10.8%	8.5%

Conclusions

First consider IWM versus SPY. They are comparable in returns. Note SPY beat IWM 5 of the 10 periods. IWM's average return is a little higher but the risk is significantly higher.

Now look at TNA. It comes up short of 3X in the gain department, though still a significant gain all around. Returns ARE spectacular. But look at that risk! TNA's risk is more than 3X the IWM risk and 4X greater than SPY.  Again, buckle your seat belt if you go for TNA's higher returns.

Feel free to post comments.

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.

Now Consider TQQQ

The next logical step after considering the QQQ is to look at the ProShares UltraPro QQQ (TQQQ), that is the 3X leveraged Nasdaq 100 exchange traded fund. Leveraged ETFs get bad press because they supposedly carry hidden risks for small, unsophisticated investors. Brokers charge higher margin requirements for leveraged ETFs, especially 3X ETFs ,which are advertised to deliver three times the daily return of their underlying index-3X up OR down!

Here I will compare the TQQQ to its underlying fund, the QQQ. Two caveats: leveraged funds have higher fees and leveraged funds are marketed only as short term investments, that is, the 3X returns apply only to daily moves in the underlying, not for moves longer than one day.

Do the higher fees embedded in the TQQQ erase their supposed excess returns over the plain vanilla QQQ fund? And, what ARE the long term effects of TQQQ? Yahoo data for TQQQ begins 2/11/2010. Here are the results.

The below are continuously compounded rates of return.

Annualized Returns
as of 11/29/2017
	TQQQ	QQQ
1 month	107.8%	17.9%
3 month	90.2%	-30.4%
6 month	55.9%	-10.0%
1 year	81.9%	14.0%
3 year	32.7%	8.8%
5 year	47.3%	15.4%
Since TQQQ Inception	27.3%	9.8%

* 2010 return is for the period 2/11/2010 to 12/31/2010.
* 2017 return is for the period 1/01/2017 to 11/29/2017.

Risk and Return

	TQQQ	QQQ
3 year mean	32.7%	8.8%
3 year standard deviation	28.8%	8.9%
5 year mean	47.3%	15.4%
5 year standard deviation	30.5%	9.6%

Conclusion

WOW. TQQQ returns are enormous. The 3 and 5 year returns do deliver 3 times the QQQ. The risk is enormous too-in the 28 to 30% range.  The risk adjusted returns, that is, the return delivered per unit of risk is comparable for both funds but the 5 year QQQ return per unit of risk exceeds that of the TQQQ.

The question for most in investors is risk. 9%-10% risk looks reasonable and is found in the QQQs. 29% to 30% found in the TQQQs may be too much to stomach for most investors.

Feel free to post comments.

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.

QQQ versus SPY

Fairness in Indexing

With all the research and talk about the superiority of indexing over active management, a major issue not yet addressed here is which index has the highest performance? Every index is just a portfolio. Indexes vary by their portfolio selection criteria. The S&P is based upon a sector neutral market capitalization criteria, size. The Nasdaq 100 although is based, in-effect, upon a technology sector specific criteria. The Nasdaq picks winners, the tech sector, which is a basic violation of modern portfolio theory (MPT).

As we approach 2017 year-end, the outperformance of the Nasdaq 100 Index over the S&P 500 just gets larger and larger. It's only fair to review the long-term performance of the Nasdaq and compare this to the S&P. The relevant symbols here are the SPDR S&P 500 ETF (SPY) and the PowerShares QQQ ETF (QQQ). Of course, there are other similar ETFs but SPY and QQQ are the largest, most active of the lot.

Results

Yahoo data for the QQQ starts on 3/10/1999 and our results begin with this date to the present (11/27/2017).

The below are all continuously compounded rates of return.

Annualized Returns
as of 11/27/2017

	SPY	QQQ
1 month	11.7%	38.6%
3 month	26.8%	243.3%
6 month	21.4%	139.6%
1 year	18.6%	79.6%
3 year	9.6%	31.0%
5 year	14.2%	28.8%
10 year	7.8%	17.2%
15 year	8.8%	15.6%
Since QQQ Inception	5.6%	9.3%

Risk and Reward

	SPY	QQQ
3 year mean	8.7%	12.3%
3 year standard deviation	5.2%	7.6%
5 year mean	14.9%	17.4%
5 year standard deviation	8.9%	8.9%
10 year mean	6.8%	10.9%
10 year standard deviation	19.4%	23.9%

Conclusion

QQQ indeed sharply outperforms the SPY even after the disasterous three year tech collapse at the inception of the fund. As for risk, the QQQ is generally higher risk, but only the most recent 3 year period has a higher risk adjusted return for the SPY.

In spite of these results, the question for investors remains: how period dependent is the QQQ outperformance?  The recovery after the 2009 recession was a good long-term test and QQQ sharply outperformed once again.

Does this mean investors should abandon the SPY for the QQQ? In theory, no, because the QQQ implicitly means picking winners and MPT is cautionary against that approach. In practice, the nature and ubiquity of tech may offset the negatives of stock picking, and the results are a powerful testament.

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.

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.

Morningstar Falling

The recent story in the Wall Street Journal,

The Morningstar Mirage

Investors everywhere think a 5-star rating from Morningstar means a mutual fund will be a top performer—it doesn’t ,

has created a stir in the mutual fund business and in Morningstar itself which issued forceful rebuttals: 

There’s No Morningstar Mirage - We Illuminate Investing‎

The Wall Street Journal’s Statistical Fog

Setting the Record Straight on Our Fund Ratings

In addition to claim and counterclaim there have been reviews from the peanut gallery:

Morningstar Versus The Wall Street Journal: Who Won?

WSJ vs Morningstar

The upshot of all this back and forth, including the numerous studies cited in the "Who Won?" story, is that Morningstar, as expected, offers very little benefit to investors.

In my opinion, the 5-star ratings serve the interests of the fund companies that pay for them. The extensive list of categories don't really exist except to create a grouping where a fund manager can claim higher ratings.

The details of this exercise leave us with the outcome we expected: the only useful result from investment theory for individual investors is that index funds outperform. Again, our quest comes up short.

American Funds Bold Claim

I'll try to keep this post as short as possible but it seems doubtful. Earlier this year investors were regaled with ads from American Funds claiming: "A Group of Select Equity Funds Has, on Average, Consistently Beaten the Index"

Key words here are "group" and "consistently". I guess this implies that individually and for some periods they don't beat the index. After all kinds of vague charts and unspecified data, the last page of their pdf gets specific.

Seven American Funds are represented as a select group that can beat the index (VFINX).

	Symbol	Inception
Investment Company of America A	AIVSX	1/2/1934
American Mutual Fund A	AMRMX	2/21/1950
Washington Mutual Investors Fund A	AWSHX	7/31/1952
AMCAP Fund A	AMCPX	5/1/1967
The Growth Fund of America A	AGTHX	11/30/1973
Fundamental Investors A	ANCFX	8/1/1978
The New Economy Fund A	ANEFX	12/1/1983

Vanguard S&P 500 Investor Fund

VFINX

8/31/1976

Now lets acknowledge that these are great American mutual funds. The oldest fund here, the Investment Company of America goes back to 1934! Not sure what funds, if any, merged into AIVSX (or the others); but that would have a direct bearing on survivor bias and invest-ability.

I always wondered if any of the old funds have shareholder records going back to 30 years or more. I wonder what those old accounts actually look like today.

To test American's claim I took Yahoo's dataset, and compared the above funds. Caveat: I am comparing NAVs to NAVs, fees NOT included.  Is this fair? Well, both American and Vanguard have different fund classes with differing fees. American Fund A shares have some of the highest loads in the business, but then again, they are legacy funds. So to avoid the load penalty, I am using NAV for comparisons.

And these are the results:

VAMI RETURNS

VAMI Table:

AWSHX   $20,806.88

AGTHX   $22,019.03

ANCFX   $21,394.35

AIVSX    $14,844.63

AMRMX  $13,950.99

AMCPX   $12,828.53

ANEFX   $13,841.07

VFINX   $22,008.00

Only three funds, AWSHX, AGHX and ANCFX compare favorably to VFINX over the long term.  For shorter periods, nearly ALL the listed American Funds do well.

ROLLING RETURNS

Q32017
	VFINX	AWSHX	AGTHX	ANCFX	AIVSX	AMRMX	AMCPX	ANEFX
YTD	13.21%	12.14%	16.54%	14.56%	12.02%	11.34%	14.10%	24.17%
1-Year	16.93%	17.63%	18.11%	18.48%	15.05%	14.41%	15.83%	23.33%
3-Year	10.13%	9.39%	10.94%	10.88%	8.87%	9.09%	9.06%	10.79%
5-Year	13.15%	12.71%	14.10%	13.61%	12.89%	11.81%	13.64%	14.80%
7-Year	13.28%	12.85%	13.10%	12.76%	12.10%	11.71%	13.18%	13.50%
10-Year	7.06%	6.62%	7.09%	7.01%	6.35%	6.84%	7.70%	7.92%
15-Year	9.45%	9.06%	10.27%	10.67%	8.98%	8.97%	9.67%	11.43%
20-Year	6.67%	7.30%	9.05%	8.22%	7.42%	7.35%	8.46%	8.11%
30-Year	8.97%	8.95%	9.06%	9.23%	8.09%	7.80%	7.49%	7.81%

The above are 8 rolling period returns for VFINX and the 7 American Funds in this test. American Funds beat VFINX in 33 of the 63 periods shown.  American Funds beat the index 52% of the time.  Three funds, AGTHX, ANCFX and ANEFX beat 89% of the time periods tested.

CALENDAR YEAR RETURNS

My data spans 31 complete calendar years, 1986 to 2016, and 3Q2017 year-to-date. American Funds overall beat VFINX 40% of the calendar years.  The individual fund beats vary from a spectacular 53% for ANCFX to 44%-34% for the others.

RISK REWARD

3, 5 and 10 year standard deviations of annualized returns have the following results:

3-Year Standard Deviation: 2 of 7 American Funds beat VFINX
5-Year Standard Deviation: 1 of 7 American Fund beats VFINX
10-Year Standard Deviation: 3 of 7 American Funds beat VFINX

CONCLUSION

American Funds NAV generally, over shorter time frames, meet and one beats the returns of VFINX with slightly higher risk. American Funds bold claim is fair.

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.

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.

VFINX Data Test: Yahoo vs Vanguard

Before going any further with index to fund comparisons, we must know just how good IS Yahoo historical price data?

Lets set the scene:

-The idea is to compare historical VFINX data from Yahoo and Vanguard.
-Return calculations must include effects of distributions (dividends, capital gains) and stock splits.
-Yahoo provides Net Asset Value (NAV) closing prices, dividend data and "adjusted closing" prices, adjusted by split and dividend multipliers. Thank you Yahoo. Without these we could not do valid return calculations.
-Vanguard does NOT provide adjusted closing prices for their mutual funds. Vanguard also only provides ten years of distribution data, not a complete set.
-We are left with closes as the only "raw" head-to-head price comparison of Vanguard and Yahoo.
-Yahoo provides dividends for its entire dataset but Vanguard provides only 10 years of dividends.

Taking the price and dividend download of VFINX from Vanguard and matching it against the Yahoo download, we have the following results for the "closing price" series:

Date of downloads: 10/1/2017
Yahoo database start date: 1/2/1980
Vanguard database start date: 8/31/1976

Number of days in Vanguard data: 10,366
Number of days in Yahoo data: 9,525

Number of date errors: 3
Number of Yahoo price errors: 124 out of 9,525 prices (121 excluding missing dates).

Vanguard database dividends reported: 40
Yahoo database dividends reported: 154
Number of reported date errors: 0
Number of reported dividend errors: 0

Here are ALL the errors found in Yahoo's VFINX closing price data.

Due to rounding, most of these are not even errors!

CONCLUSION:  YAHOO DATA IS RELIABLE!


Notes:
-While the VFINX inception date is 8/31/1976, Yahoo only provides data since 1/2/1980.
-Yahoo data is missing for 10/30,2012, 10/29/2012 and 1/2/2007.
-I did not check Vanguard dates, which appear to be complete.
-Vanguard's website only shows dividends for ten years total. This download has a start date of 12/21/07.
-Yahoo data includes all dividends since 1/2/1980.
-Prices were rounded to two decimal places.

Even after this conclusion we have one more step to go: using the available Vanguard dividend data, compare Yahoo's adjusted close to Vanguard's "adjusted" close (called "reinvest price" by Vanguard) For all available dividend dates posted by Vanguard, Yahoo is the same!

Vanguard fun facts: Vanguard has the following S&P 500 Index Fund classes:

Class, Symbol, Inception date, Expense Ratio, Minimum Investment, Assets Under Management

Investor, VFINX, 8/31/1976, 0.14%, $3000, $27.3 Billion
Admiral, VFIAX, 11/13/2000, 0.04%, $10,000, $212.6 Billion
Institutional, VINIX, 7/7/1997, 0.035%, $5 Million, $134.2 Billion
Institutional Plus, VIIIX, 7/7/1997, 0.02%, $100.0 Million, $93.2 Billion
Institutional Select, VFFSX, 6/24/2016, 0.01%, $5.0 Billion, $29.6 Billion
ETF, VOO, 9/7/2010, 0.04%, 1 share, $71.8 Billion

As expenses differ, each class will have its own price series.

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.

ACSI v SPY

This post will compare ACSI to SPY. It's interesting because ACSI has an entirely different methodology using customer satisfaction as a basis for investment. This is a new fund. Yahoo's data begins 11/7/2016.

Here's the chart and return data for the comparison.

ACSI v SPY

As anyone can see, ACSI holds up very well to SPY. Of course, this is a very limited dataset and few conclusions can be drawn from it.

If anyone wants the excel spreadsheet, just ask.

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.

The Benchmarks-VFINX SPY VOO

For this post I will look at the history of the VFINX, SPY and compare them both to the Vanguard S&P 500 ETF-symbol VOO.

Comparing VFINX and SPY is a good starting point. We need to see if both benchmarks, which measure the same thing, ARE the same. VFINX and VOO is a valid comp because the VOO is the ETF version of the VFINX. The ETF is just another wrapper for the same content. Investors need to know if wrappers matter.

There ARE other index mutual funds and index ETFs  (such as IVV) but they all started much later than the VFINX and SPY and I am not sure the comps of these others will be useful to investors. Since these all measure the same thing, we can expect them to be the same. Below are the history and and data for the VFINX, SPY and VOO.

Full History

Chart 1. Full History

Table 1. Full History

There ARE differences. For some reason, when compared head to head for full years only, the mutual fund has a higher average annual return and lower standard deviation of annual returns than either ETF. Most interesting may be the VOO data which shows a significantly lower return than its mutual fund cousin.

Does the ETF reduce return when compared to the same thing in a mutual fund? Maybe Vanguard has an answer.  The risk reward chart shows VFINX, the top left data point, outperforming with higher return and lower risk than either the SPY, middle point, and VOO, the far left point.

Chart 2. Risk Reward

Despite the return difference, the correlations are very high, as expected.

Table 2. Correlation

VFINX versus SPY

This is head to head vami chart starting with the start date for SPY, 1/29/1993 = 1000.


Chart 3. VFINX versus SPY

Table 3. VFINX versus SPY

When I first looked at this, I thought there was an error starting with the 3/9/2009 recession low. Here are the peak to trough to current date returns.

Table 4. Peak to Recession Trough to Present

VFINX mutual fund sharply outperformed SPY for these critical periods. I still don't get it, but I cannot find an error.

VFINX versus VOO

Here may be the most remarkable test. VFINX and VOO are the same fund except one is a mutual fund and the other is an ETF as noted before. This is a vami chart showing the difference.

Chart 4. VFINX to VOO

As noted before, either mutual funds outperform ETFs or there is a problem I am missing. I'll ask Vanguard about this. Note: mutual funds are marked to NAV every close while ETFs are freely traded with arbitrage enforcement.

The excel spreadsheet for this post is available to anyone. Just ask.

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.