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Vanguard 401-k surprise
Old 02-10-2014, 09:50 PM   #1
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Vanguard 401-k surprise

Decided it was time to look at re-balancing the portfolio today, and I started looking hard at the funds I am in at Vanguard. All are in a 401-k, and the list of funds available in the account are somewhat limited.

It took a long time to navigate, but I eventually ended up with an extended quote for a few of the funds. Not all funds offered the identical information.

Turns out that several of the funds have a p/e in excess of 30. I was very surprised to see that level of potential volatility, especially since some of these were funds of funds, target date funds, and funds that have the work "index" in them.

Anyone else run into this issue, and if so, what, if any, adjustments did you make?

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Old 02-11-2014, 03:24 AM   #2
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I don't look at the P/E ratio of my funds since they are index funds. However, one can tilt towards value equities which should have lower P/E ratios than growth equities. If that is what you want to do, then select index funds with a value-tilt such as Vanguard Small cap Value index fund as opposed to Vanguard small cap growth index fund.

Also, one can increase their allocation to fixed income index funds and reduce their allocation to stock index funds if they are bothered by P/E ratios.

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Old 02-11-2014, 10:51 AM   #3
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The S&P 500 P/E is pretty high too, so it's not surprising that some funds would be above that. Indexing has nothing to do with it, other than no one is selecting low P/E stocks for you. As LOL! suggests, you might prefer to create your own tilt towards value stocks. VTV is a Vanguard large-cap ETF with a P/E of 14.2 ("forward looking") according to M*.
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