Vanguard vs Fidelity Asset Allocation

[ejman]

I've using the tools available at the Vanguard website under the Voyager Services for quite a number of years to keep track of my AA and to rebalance occasionally as the "bumpers" are reached (Currently my equities band is 55-65%)

I am now at 62% equities and just for the fun of it and since my wife has an account with Fidelity I entered all my fund info into the Fidelity retirement module and much to my surprise it came up with an equities allocation of 55%. My interest really motivated now I went ahead and put the same fund data into Morningstar which gave me an equities allocation very close to Fidelity at 56%.

Poking some more into how the large discrepancy with Vanguard comes about it appears at first glance that Vanguard is not tracking the cash in individual mutual funds as cash but actually as either equities or bonds depending on the primary flavor of the fund.

Is this impression correct? if so, on first blush Vanguard's approach kind of makes sense in that the cash held in individual funds is not available to me as cash so maybe it should not be treated as such for AA purposes. On the other hand it really is cash within the fund so I've managed to autoconfuse myself as usual

How should this cash be tracked (if the reason for the discrepancy is indeed the cash in the funds)?

 

[nwsteve]

Ejman
The similarity between and M* and Fido makes sense since Fido uses a feed from M* to do their Portfolio Analysis. The Fido portfolio analysis allows you see by category of equity as well as a style distribution of your portfolio.
I personally find the Vanguard presentation much weaker than Fido in general when it comes to providing portfolio analysis. For example, the I had to go into each Vanguard fund and two pages into fund detail to find the percentage in Foreign stock. What I found interesting is that all the funds were classified by Vanguard as Domestic Equity. The most outstanding case was Vanguards's Precious Metals--88% Foreign but still considered by V as a domestic equity-sector fund. Even their Healthcare fund was 25% Foreign.
If Vanguard has a more detailed view of the portfolio I would much appreciate being guided to it.
Thanks
Nwsteve

 

[LOL!]

It is well-known and common knowledge at the bogleheads site that the Vanguard PortfolioWatch tool gives erroneous output. Use it at your own peril.

Since the M* portfolio X-ray is free via TRowePrice, that's what I use.

 

[ejman]

Thanks. I was not aware that the Vanguard AA tool gives incorrect info. I've been far more conservative on my asset allocation than I knew. Maybe that's part of Vanguard's plan for its customers

 

[RockyMtn]

If it is strictly for AA purpsoses you are really looking for a true snapshot of what your various funds/investments are invested in. If its in cash you should count it as cash...not bonds or equities.

Remember, you are trying to see where the money is allocation wise so it is important that you consider what the allocations are within your various investments as well.

 

[Nords]

Thanks. I was not aware that the Vanguard AA tool gives incorrect info. I've been far more conservative on my asset allocation than I knew. Maybe that's part of Vanguard's plan for its customers

You're getting what you pay for. It's probably better to have Vanguard's rock-bottom expenses and to go elsewhere for analysis/services.

 

[FIREd]

I think that Vanguard does a fairly good job. Managed funds sometimes hold a lot of cash because of market conditions. But that cash could be put to work very quickly if the manager thinks that it is warranted. Actually, the cash might have already been put back to work and the change might not be reflected on Morningstar's website yet. I haven't seen any evidence that mutual fund portfolios are updated more than a few times a year on Morningstar. For example VWELX's portfolio has not been updated since 07/31/09, VGTSX's portfolio has not been updated sinec 06/30/2009, etc... So the AA data provided by Morningstar can be pretty stale.

Therefore you might think that you have 50% in equities, because lots of managers were holding cash 6 months ago, when in fact your equity allocation is now much higher than that because managers put some cash to work during the rally.

So when I buy an equity fund, for example, I prefer to use a 100% equity allocation for that fund even if it holds a bit of cash at the moment because that cash could be invested in equities at any time.

 

[clifp]

That's interesting info about Vanguard. I use to use the M* X-Ray, but I found it pretty labor intensive so I just use Vanguard and Schwab's tools now.

 

[ejman]

Therefore you might think that you have 50% in equities, because lots of managers were holding cash 6 months ago, when in fact your equity allocation is now much higher than that because managers put some cash to work during the rally.

So when I buy an equity fund, for example, I prefer to use a 100% equity allocation for that fund even if it holds a bit of cash at the moment because that cash could be invested in equities at any time.

Yes, that was really the essence of my question. It has very practical application for me because with my 55%-65% allocation band for equities I ought to be getting ready to reallocate per Fidelity and buy stocks if it dips below 55%. But for Vanguard however at 62% am getting closer to the 65% UPPER limit and ought to start thinking about selling stocks.....

I think I'll go crawl under a rock for a while.