Author Topic: VSIAX vs. VIOO  (Read 581 times)

bolerba

  • 5 O'Clock Shadow
  • *
  • Posts: 1
VSIAX vs. VIOO
« on: April 24, 2019, 05:47:44 PM »
I was at a weekend continuing education course and the topic veered toward small cap funds.  It was mentioned that the S&P 600 has outperformed the Russell 2000 historically.  I've held my small cap allocation in Vanguard Small Cap Value Admiral Index Fund (VSIAX), but the S&P 600 ETF (VIOO) has outperformed it by about 1% a year for the last decade.  Should I replace VSIAX with VIOO?  Please let me know what you think!

Indexer

  • Handlebar Stache
  • *****
  • Posts: 1427
Re: VSIAX vs. VIOO
« Reply #1 on: April 24, 2019, 06:25:44 PM »
Let's make this 2 questions.

1. VSIAX or VIOO:  The first is a value fund, the second isn't. When small cap value outperforms growth the first will do better and when small cap growth outperforms value the second will do better. Over the long history small cap value has been better but recently it's been small cap growth. Which one will it be the next 10 years?  Hard to say.


2. Why the small cap focus?


flipboard

  • Bristles
  • ***
  • Posts: 280
Re: VSIAX vs. VIOO
« Reply #2 on: April 24, 2019, 09:53:48 PM »
I was at a weekend continuing education course and the topic veered toward small cap funds.  It was mentioned that the S&P 600 has outperformed the Russell 2000 historically.  I've held my small cap allocation in Vanguard Small Cap Value Admiral Index Fund (VSIAX), but the S&P 600 ETF (VIOO) has outperformed it by about 1% a year for the last decade.  Should I replace VSIAX with VIOO?  Please let me know what you think!
As Indexer has pointed out, one is small-cap value, one is just small-cap. Small Cap Value can underperform for decades at a time, you need to base these decisions on much longer holding periods.

But: you'd still be well served by changing indexes, because VSIAX uses CRSP US Small Cap Value Index, which isn't as strongly exposed to SCV as the S&P 600 Value index is. (Russell 2000 meanwhile suffers from front-running, but note that VSIAX follows the CRSP index not the Russell index.)

You can compare the performance of these indexes by using the following tool, it's easiest to compare VBR (the ETF version of VSIAX) to VIOV (which is Vanguard's S&P 600 Value ETF): https://www.etfreplay.com/charts.aspx

Out of the S&P 600 Value ETF's (I have no idea about funds - but there's no good reason to use funds over ETF's anyway) I prefer SLYV since it performs best (might not work for some people if they have to pay capital gains taxes though), VIOV and IJS are solid backups if you want to avoid capital gains distributions. The performance difference is minimal, SLYV is generally a fraction of a percent ahead over years.

MustacheAndaHalf

  • Handlebar Stache
  • *****
  • Posts: 1791
Re: VSIAX vs. VIOO
« Reply #3 on: April 25, 2019, 06:29:36 AM »
(copy/paste everything flipboard said, here - I agree)

Here's more detail reinforcing the earlier comment: Vanguard Small Cap Value (VBR) is 53% mid caps.  Did you know that?
http://portfolios.morningstar.com/fund/summary?t=VBR

Now take a look at SLYV, which is just 3% mid-caps:
http://portfolios.morningstar.com/fund/summary?t=SLYV

If you liked VBR's recent performance, it's very likely you benefited from mid caps, not small caps.

stepingum

  • 5 O'Clock Shadow
  • *
  • Posts: 15
Re: VSIAX vs. VIOO
« Reply #4 on: April 30, 2019, 01:23:23 AM »
Not to thread hijack, but I'm planning a target AA at present and am intrigued by including a small value tilt. Is there a recommended percentage range to tilt? I'm having a hard time finding resources that show expected risk/return differences for various small value tilts (ie, 10% vs, say, 30%).