Are vanguard investors more savvy investors?

[mathjak107]

i happen to notice something very odd about VTSMX . that is vanguards total market fund .

the oddity is if you look at morningstars invester returns,unlike the investor doing worse than the fund as the typical results show the investor actually did better.

in fact the investor through timing actually beat the funds buy and hold return over almost every time frame.

is there a reason? maybe!

s&p 500 index funds are very popular in 401k's while total market funds are not.

looking at VFINX ,the s&p 500 fund which is popular with 401k's the results were the opposite. investors once again did worse than buy and hold.


401k investors for the most part are a pretty financially ignorant group and most have no clue what is going on so they basically just sit .(not a bad thing to do ).

basically the total market fund version was traded a lot more by more savy investors and institutions and had many investors who bailed out and timed the buy back better.

but what i found interesting was:

the fidelity version of their total market had more typical results .

investor returns over 15 years was 4.84 vs 5.13 for the total market fund.

it looks like vanguard seems to have more active traders in their total market fund that got luckier and timed their buys and sells better.

it has nothing at all to do with vtsmx being a bigger more diverse fund ,it only has to do with inflow and outflow timing.

in fact the 10 year returns showed the same results. a lot more trading and a lot better timing.

in fact what i said above is evident in vfinx's returns.

fund returns over 15 years were 4.36% , investor returns were a mere 2.29%. what a whopping difference in investor ability to call things right. you can clearly see the s&p 500 fund investors as a group got it wrong very badly .

that is unskilled investors bailing out of 401k's at the wrong time as opposed to the more savy group that tended to own the total market funds.

clearly as a group vanguards total market fund investors are not in the buy and hold camp and seem to be quite good at doing what they do compared to their less savy cousins in the s&p 500 funds..

 

[pb4uski]

sounds like it might be the effect of rebalancing - or perhaps just dumb luck

 

[mathjak107]

i thought dumb luck too , but every time frame has the investors winning.

 

[clifp]

I think your hypothesis makes a lot of sense. If you think about it in order out perform the market over the last 15 years all you had to do was two things right.

Back in 1999 you had to be careful not sell bonds,cash etc, and buy stocks. Which sound simple in retrospect but of course during 1999 everybody knew that stocks were going to the money cause the internet changed everything.

Then in late 2008/2009 you simply had to avoid selling all of your stocks.

Actually you didn't even have to know anything about the market, all you had to do was realize that Warren Buffett knew more than you about investing and listen to him.
In 1999, he told people stocks were too expensive and 2008 he said to buy stocks.

 

[thefinancebuff]

i happen to notice something very odd about VTSMX . that is vanguards total market fund .

the oddity is if you look at morningstars invester returns,unlike the investor doing worse than the fund as the typical results show the investor actually did better.

Retail investors are in the Admiral shares VTSAX for the most part (Vanguard automatically upgrades you once you go over $10k). VTSMX are held by small investors with less than $10k and by 401k participants whose plans use the higher expense ratio to offset admin cost. These are not the savvy investors as your theory says.

 

[mathjak107]

true but the same pattern seems to exist for VTSAX with investors beating the fund at times. it is to hard to really compare since VTSAX has no 15 year history, only up to 10.

bucking the results of most funds, investors in VTSAX in the 3 yr and 10 year time frames beat the fund but more important the years they didn't it was not by 30-50% like other fund families it was only a fraction of a percent.