New Vanguard Small Cap Growth Fund: VBK

[raylopez99]

https://personal.vanguard.com/us/funds/snapshot?FundId=0938&FundIntExt=INT

One wonders why anybody would invest in a small cap growth fund, which
long term has the worst performance of any stock mutual fund, but
perhaps for diversification (since even gold, historically with a sub-
par average performance and larger than expected variance, has
outperformed nearly all other asset classes in the last few years).

Also the expense ratio, at 0.11%, is low, another Vanguard typical
advantage.

RL

[JOSE BAILEN]

As the Sharpe ratio indicates, small cap growth stocks have -by far-
the worst risk-adjusted average returns of all groups of stocks.

Depending on the time horizon of your investment, given past
performance (Fama and French spreadsheet) I think the best strategy
could be as follows:

1/ If you plan to invest and hold for at least 25 yrs, then small cap
value stocks are your best bet : in the worst case scenario their
average return was 16.15% -the 25 yr period that goes to 1974-, which
was clearly higher than the return of any alternative portfolio
investment.

2/ if you buy and hold for 15-25 yrs, then a combination of small cap
value (let's say, 85%) and large cap value stocks (15%) would maximize
risk-adjusted returns.

3/ If you buy and hold 10-15 yrs, then 65% of small cap value, 20% of
large cap value, and 15% of a benchmark large cap index -lets say, a
low cost S&P indexed ETF- could be your best bet.

4/ 5-10 yrs: 40% small cap value, 30% large cap value, and 30% a
benchmark large cap index.

5/ less than 5 yrs: I wouldn't bother to invest in stocks at all...

I'm talking only about asset allocation between different types of
stock portfolios. Of course, this asset allocation should be
complemented with plenty of cash, i.e., savings accounts (the exact
amount of cash depends on factors such as non-investment income,
dividend yield of the portfolio, expenditures, reliability/stability
of income sources and expenditures, etc...).

[raylopez99]

So why does Vanguard offer this fund? Perhaps marketing pressures?
(BTW the heir to Saint Jack at Vanguard recently said he is going to
retire, and he was the driver for new funds to increase the asset
base, as well as ETFs).

Personal note: hope to be going to Guadalahara to meet a hispanic
girl, friend of a friend... as you may know they're very pretty down
there (been there before).

RL

[JOSE BAILEN]

Some people may consider that these small cap growth funds are a good
choice. After all, some of today's most important technological
companies started as small cap growth stocks.

It's not that every small cap growth company is a bad investment, but
that, on average, for each one of the succesful small cap growth
companies, there are many more which fail to live to their
expectations. On average, they are overpriced, that's the usual
problem with these stocks...

[JOSE BAILEN]

Have you been to Spain before? Guadalajara is a small city but is
close to Madrid -about 45 mins- so I'm sure you will enjoy your stay
in Spain.

Spanish girls are usually very "simpaticas" (friendly) and feminine,
so I'm sure you will have lots of fun with your friend.

On Tue, Feb 26, 2008 at 4:10 PM, raylopez99 <raylo...@yahoo.com> wrote:
>

[raylopez99]

On Feb 26, 8:54 am, "JOSE BAILEN" <jose.bai...@gmail.com> wrote:
> Have you been to Spain before? Guadalajara is a small city but is
> close to Madrid -about 45 mins- so I'm sure you will enjoy your stay
> in Spain.
>
> Spanish girls are usually very "simpaticas" (friendly) and feminine,
> so I'm sure you will have lots of fun with your friend.

No, unfortunately I've never been to Spain. This is Guadalajara,
Mexico. But some people say the prettiest (tall, light skinned, if
you're counting) come from there, since presumeably they came from the
sister city of Guadalajara, Spain.

RL