Vanguard 500 Index Investment Fund (VFINX) is a large-blend mutual fund that uses an indexing investment approach designed to track the performance of the S&P 500’s index. The fund employs a passive management investment approach. It is a low cost way to gain diversified exposure to the equity market in the United States. The fund invests in 500 of the largest companies in the United States. The companies span many different industries and the fund accounts for about 75% of the United States stock market’s value. VFINX measures the investment return of large-capitalization stocks. The most obvious risk is the volatility that comes with its full exposure to the stock market. The mutual fund portfolio’s composition is made up of 99.45% stocks and .55% cash. The expense ratio for this mutual fund is .17%. This is the annual fee that shareholders are charged. It expresses the percentage of assets deducted each fiscal year for fund expenses, including 12b-1 fees, management fees, administrative fees, operating costs, and all other asset-based costs incurred by the fund. For the Year-to-Date (ytd) rankings in its category, VFINX ranked in at 24 according to Yahoo! Finance. Over the last 10 years, the fund has performed in direct correlation to the S&P 500 being that it is an index fund and there is a beta of 1, meaning that whatever the S&P 500 does, the fund will do as well. VFINX is a good choice if an investor is seeking a mutual fund that offers the stability of large, established companies and the wide exposure of a fund that holds both value and growth stocks.…
Carhart, M. M., “On Persistence in Mutual Fund Performance”, Journal of Finance, 52(1), 57-82, 1997…
Over a period of 15 consecutive years from 1991 to 2006, Miller’s Legg Mason Value Trust (LMVTX) was able to outperform the S&P 500. In the recent 22 years, there were two non-ideal periods of LMTVX. The first one was during the bear markets of early 2000s (from 2000 to 2002) caused by the crisis of tech companies and the 911. The 2nd one started from 2006 to 2009 during the world economic recession resulted by subprime mortgage crisis. However, during year 2000 to 2001 LMVTX still outperformed the S&P500. Year 2006 was the 1st first LMVTX tailed the return of the S&P 500 since 1991.…
* Carl, a portfolio manager for the Alpine Trust Company, has been responsible since 2010 for the City of Alpine’s Employee Retirement Plan, a municipal pension fund. The plan board of trustees directed Karl 5 years ago to invest for total return over the long term. However, as trustees of this highly visible public fund, they cautioned him that volatile or erratic results could cause them embarrassment.…
The problem in this case is to determine if it’s rational for an equity investor to buy shares of Value Trust. Looking at the success Bill Miller achieved with his mutual fund, it seems rational for an investor to buy shares in Value Trust in 2005. It’s…
On the other hand, there are managers who are believe that the market is inefficient. Such managers claim to be skilled enough to beat the market complications. They are called active managers, but actively managed funds have high management fees and are more expensive to maintain, as a result, it becomes almost impossible for them to outperform the market. Hence, we can confidently suggest that investors should invest in index tracker funds rather than actively managed funds because of the high cost disadvantages and non-persistence to beating the market value. [Agarwal, V.; N. D. Daniel; and N. Y. Naik (2009)].…
After discussing your concerns, Dan gives you some information comparing the performance of equity mutual funds and the Vanguard 500 Index Fund. The Vanguard 500 is the world’s largest equity index mutual fund. It replicates the S&P 500, and its return is only negligibly different from the S&P 500. Fees are very low. As a result, the Vanguard…
The Little Book that Still beats the Market is a short piece of writing that presents clear and simple explanations of the basics of investing and how the stock market works. Through his years of experience and expertise, Joel Greenblatt has constructed a “magic formula” that promises to deliver above-average returns on your investment in the long run. In this paper, I will discuss several topics that include: a summary of the book, what I found most exciting about the book, the magic formula and several stocks that I picked out using the magic formula investing website.…
Value Trust is a mutual fund that has performed well against various indexes in the years leading up to 2005. Value Trust takes S&P 500 as its benchmark index, which it has outperformed for the last 14 years. Prior to 2005, Value Trust had an average annual total return of 14.6%, which was 3.67% higher than S&P 500’s average annual returns. From exhibits 1 and 5 we can see that the return was much higher for Value Trust (15.04%) compared to the S&P 500 (9.48%) over a ten year period. The NAV was consistently increasing from 1994 to 2000 up until the market crash when the NAV decreased but then again increased consistently until 2004. The NAV is an investment measure and increase indicates a better performance. Also from exhibit 1 we can see that the annual return of Value Trust was higher than the S&P 500’s over the years. According to the case Value Trust uses S&P 500 however we should make some analysis on what kind of shares S&P 500 deals with versus what kind of shares Value Trust deals with. S&P comprises of 500 widely held common stocks in other words large cap stocks. On the other hand 50% of Value Trust’s assets were of only 10 large cap companies and Value Trust was open for investing in growth companies. This made the beta of Value Trust (1.31 as taken from Exhibit 1) higher than S&P’s beta indicating that Value Trust is riskier. In this case to make the benchmark more comparable to Value Trust we chose to use other benchmarks, such as the S&P 400 mid-cap. Although this benchmark may give the impression that Value Trust did not perform as well as it should have against its peers (Value Trust’s 10-year annualized return is 15.95%, compared to the S&P mid-caps’ 14.13%), the fact that the fund still outpaced this smaller S&P fund is remarkable.…
Along with generating the highest return, our portfolio had the highest risk. Compared to the 3.6 percent standard deviation of returns on our portfolio, the VFINX Index (1.87%), the NASDAQ 100 (2.54%), and the VHGEX Index (1.60%) all show less volatility (Exhibit 2 shows the standard deviations of the 4 portfolios; for graphical evidence see Exhibit 3).…
Set in the autumn of 2005, the case recounts the remarkable performance record of Value Trust, a mutual fund managed by William H. (Bill) Miller III at Legg Mason, Inc. The case describes the investment style of Miller, whose record with Value Trust had beaten the S&P 500 fourteen years in a row. The tasks for the student are to assess the performance of the fund, consider the sources of that success, and to decide on the sustainability of Miller’s performance. Consistent with the introductory nature of this case, the analysis requires no numerical calculations. The instructor should not be deceived, however, because the absorption of the capital-market background and the implications of the finance concepts in the case will fully occupy the novice. This case updates and replaces “Peter Lynch and the Fidelity Magellan Fund,” (UVA-F-0777) and “The Fidelity Magellan Fund, 1995” (UVA-F-1126).…
Zeus Asset management is a fund management firm which has a conservative and risk averse investment philosophy. It believes that a quality-oriented approach can lead to a favorable financial performance. Compared with its main competitors, it provides customer-oriented services, invests municipal bond fund and implement a strategy of teamwork. Zeus chooses to utilize risk-adjusted returns as it believes that investors won’t pay for such return which stems from taking corresponding risks merely. What investors require is that Zeus provides them with a performance which bears benchmark. Every risk-adjusted return methods have two sides of the same coin which make some of them more appropriate for some specific fund comparison.…
As of 2005, Value Trust had outperformed its benchmark index, the S&P 500, for 14 years consecutively. Given that the next longest period of sustained performance was only half as long, 14 consecutive years of excellent performance set a record as the longest streak of success for any manager in the mutual-fund industry. The average annual total return for the past 15 years was 14.6%, which was higher than the S&P’s 500 by 3.67%. Value Trust had 36 holdings, 10 of which accounted for nearly 50% of the fund’s assets. Morningstar gave Value Trust a five-star rating.…
J.D. Williams, Inc is an investment advisory firm that manages more than $120 million in funds for its numerous clients. The company uses an asset allocation model that recommends the portion of each client’s portfolio to be invested in a growth stock fund, an income fund, and a money market fund. To maintain diversity in each client’s portfolio, the firm places limits on the percentage of each portfolio that may be invested in each of the three funds. General guidelins indicate that the amount invested in the growth fund must be between 20% and 40% of the total portfolio value. Similar percentages for the other two funds stipulate that between 20% and 50% of the total portfolio value must be in the income fund and at least 30% of the total portfolio value must be in the money market fund.…
This is to Certify that Ms. Sonakshi Jain Student of BBA III Year at Shri Vardhman Girls College,Beawer has completed training project report entitled “comparitive study between different schemes of BSLI MUTUAL FUND”. The project has been completed after studying for 2 year in B.B.A course and for partfully fulfilling the requirement for award of degree of B.B.A. from Mds university Ajmer.…