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CY 2005 Rtn. - S&P500 vs. 500 Index Funds
Old 01-05-2006, 10:41 AM   #1
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CY 2005 Rtn. - S&P500 vs. 500 Index Funds

According to Standard & Poors, the S&P 500 returned 3.00% for calendar year 2005.

But the Vanguard 500 index fund returned 4.77%.* Vanguard also shows the 500 index itself as returning 4.91%, not 3.00%. Both shown here:

http://flagship5.vanguard.com/VGApp/...BarChart=false

TRowe Price shows their 500 index fund as having returned 4.62% for CY 2005 (which tracks with what my $ return in their fund was for 2005).
Look at PREIX, the tenth fund down, at 1 Yr. return.

http://www.troweprice.com/common/ind...gid=retailhome

So why the big difference between the index FUNDS, and the actual INDEX?* It would seem to be too much for tracking error.* Does the S&P500 INDEX not include dividend return?* Seems odd that it wouldn't, if that is the real difference.

?
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds
Old 01-05-2006, 10:44 AM   #2
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds

Quote:
Originally Posted by Telly
Does the S&P500 INDEX not include dividend return?
I think you hit the nail on the head. The margin of difference in returns you noted is about what the dividend yield is.
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds
Old 01-05-2006, 01:56 PM   #3
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds

Expense ratios, reporting periods, dividends, and how the index handles adds/losses to the index. You may find that some funds tweak the start/end dates of the 'period' to make things look a little better.

Some index managers can slightly improve on efficiency of their funds by how they handle their buys and sells. Look over the vanguard site, theres some stuff there somewhere I've read that shows how Sauter manages the indexes to squeak out a little more goodness.
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds
Old 01-05-2006, 08:42 PM   #4
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds

Not really sure.* I bet vanguard assumes reinvestment of dividends.* Standard and Poors would not assume dividends are reinvested but just distributed.
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds
Old 01-07-2006, 02:07 PM   #5
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds

UPDATE!

First off, thanks for all your comments

I just poked around some more on S&P's website. And found out in their math of indexes pdf that there are TWO different S&P 500 index returns.

Price Return, which is on price only.

Total Return, which includes dividends reinvested .

I found a new S&P press release that shows CY 2005 return as 4.91 %. They did not specify which return, but the URL for the document has Total Return in its name.

S&P has added to the confusion by not clearly identifying which return. Many media outlets picked up and distributed the return for 2005 as 3.00%.

So now I know that the return I should compare mutual funds to is the Total Return, which is 4.91% for 2005.

See how quickly things get balled up when people don't label their work?

Here are the Total Returns on their indexes for 2005 (under Index News, click on "Standard and Poor's Reports December Index Returns" in the link below):
http://tinyurl.com/8dhn5

EDIT: Shortened URL
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds
Old 01-07-2006, 04:02 PM   #6
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Re: CY 2005 Rtn. - S&P500 vs. 500 Index Funds

Mystery Solved.
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