Gyroscopic Investing

Now that we have seen small cap value outperform this year I have been surprised in the difference in returns for each of the indexes.

All of the funds track different indexes

Vanguard S&P Small-Cap 600 Value ETF
https://investor.vanguard.com/etf/profi ... mance/viov

YTD 31.93%


Vanguard Russell 2000 Value ETF
https://investor.vanguard.com/etf/profi ... mance/vtwv

YTD 27.73%

Vanguard Small-Cap Value ETF
https://investor.vanguard.com/etf/profile/overview/vbr

YTD 24.38%

Most disappointing is the VBR fund which is the cheapest small cap value fund available from Vanguard.

Is this just noise or is there something inherently worse with VBR?

It comes down to index definitions. In terms of size, here's a chart that shows the market coverage for each of the 3 indices. Note that VBR follows CRSP.



As you can see, the S&P Smallcap 600 covers a much smaller slice than the other two and would probably be classified as mid cap by Russell standards. And that's before you get to the valuation rules and trading bands. Apparently that slice has done pretty well lately, but it doesn't necessarily make that particular index any "better" than the others.

Here's another way to look at the normal noise between indices from year to year. As you can see, a little variability is perfectly normal and no one index is obviously superior to the others.

Incredible visualization!

Thank you!


Sp 600 really did just get lucky then with their index slice size being the smallest.

Definitely makes it hard to pick a fund to stick with for long run.

AVUV - 36.82 YTD

Wow. That Avantis fund is impressive.

The US equity with only 0.15% expense ratio and only 3% turnover rate is even more impressive with 3 to 4 % out performance.

https://www.avantisinvestors.com/conten ... ments.html