(PUB) Investing 2016

no top-10 holdings in common. As you can see in the bottom table to the left, the sector allocations are fairly different, and the average stock in S&P MidCap 400 Growth ETF is less than half the size of the average in its sibling fund. While the stock selection in the CRSP indexes is rules-based and computer- driven, S&P’s indexes are constructed by a committee looking for companies with seasoned operating track records. It’s fair to describe the S&P indexes built by this committee as actively man- aged indexes—as demonstrated by turn- over of over 35% for S&P MidCap 400 Growth ETF. Somehow, it seems to work. S&P’s growth indexes simply outperform. If you are willing to own an ETF, even though its 20-basis-point (or 0.20%) expense ratio is higher than MidCap Growth ETF’s 8-basis-point cost, go with S&P MidCap 400 Growth ETF. If don’t want an ETF, and you still want an index fund in this space, well, there is only an Institutional mutual fund share class of S&P MidCap 400 Growth, which requires a $5 million minimum investment and is out of reach to us mere mortals, but MidCap Growth Index remains a good option. You’ll find both MidCap Index and S&P MidCap 400 ETF in the Model Portfolios . The two funds have their differenc- es: In a pattern similar to what you’ll see in the growth funds, the S&P-based fund has more stocks, and the aver- age company therein is smaller. Also, the two funds have completely distinct top-10 holdings, and sector weights are meaningfully different. Looking over the past 15 years, the CRSP mid-cap index has lagged those from other providers—not just S&P, but also MSCI and Russell. The differ- ences haven’t been enormous, and over the past five years, the CRSP index has slightly edged out the S&P index. If I had to choose just one, I’d go with S&P MidCap 400 ETF. That said, if switching will increase your tax bill, I wouldn’t rush to make that change. > MidCap Index, Hold S&P MidCap 400 ETF, Buy

cap growth index fund have just two options: MidCap Growth Index and S&P MidCap 400 Growth ETF . Dan and I rate both a Buy—though when it comes down to it, my preference is for the S&P MidCap 400 Growth ETF. Despite similar names, these two funds cover the mid-cap space in dif- ferent ways. MidCap Growth Index has about 70 fewer holdings than the S&P- based fund, and the two portfolios have

Stock Market. There is an ETF share class of this fund, if that’s your prefer- ence, but then, Vanguard’s other index funds also have ETF shares. So I ask again, where does this fund fit in? MidCap Growth Index, Buy S&P MidCap 400 Growth ETF, Buy Vanguard doesn’t offer mid-cap index funds based on the Russell indexes. As a result, investors looking for a mid-

Mid-Cap’s Sweet Spot

Large Stocks Russell Top 200

Mid-Sized Stocks Russell MidCap

Small Stocks Russell 2000

Return Since 1978

5346.2% 11.2% -50.1% -49.1% -18.4% 11.6% 34.6% -6.8% 11.2% 30.6% 233.9% 17.2%

11052.2%

5954.3% 11.5% -52.9% -35.5% -17.9% 11.1% 33.9% -6.7% 10.5% 26.7% 257.4% 18.3%

Annualized

13.3% -54.2% -30.3% -17.3% 13.3% 32.3% -5.2% 12.9% 28.6% 300.6% 20.1%

Max Cumulative Loss MCL ex-Financial Crisis Rolling 36-Month Returns Min

Average

Max

Rolling 60-Month Returns Min

Average

Max

Return Since Feb. 2009

Annualized

MidCap Index

S&P MidCap 400 ETF

MidCap Value Index S&P MidCap 400 Value ETF

343 27.4

400 25.3

210 23.4

305 23.8

2.7

2.4

1.9

1.8

$11.6 0.3% 0.0% 12.1% 13.7% 5.2% 20.4% 8.3% 16.7% 13.0% 4.3%

$4.6 0.0% 0.0%

$11.2 0.5% 0.0% 11.0% 16.6% 5.3% 25.2% 4.7% 10.7% 8.8% 7.7%

$4.1 0.0% 0.0%

11.6% 4.2% 3.9% 15.0% 8.2% 14.2% 18.0% 7.2% 11.9% 0.2% 5.6%

10.7% 3.1% 7.4% 16.3% 3.1% 17.7% 13.9% 8.7% 9.8% 0.3% 9.0%

not reported

not reported

1.1% 5.2%

0.3% 9.7%

7%

6%

11%

9%

Ross Stores

IDEXX Laboratories WhiteWave Foods

Newell Brands Newmont Mining ConAgra Foods

Alleghany

Edwards Lifesciences

Westar Energy Everest Re Group

Equinix

Ingredion Duke Realty ResMed Synopsys CDK Global

Newell Brands Electronic Arts

Molson Coors Brewing WEC Energy Group Willis Towers Watson Eversource Energy

UGI

Computer Sciences

Fiserv

Nielsen Holdings New York Comm. Bancorp

Newmont Mining

Reinsurance Group

ConAgra Foods Alexandria Real Est. Equ.

Carlisle Cos. OGE Energy

Amphenol

Alleghany Dr Pepper Snapple Group

Concho Resources

Regency Centers

DTE Energy

Steel Dynamics

The Independent Adviser for Vanguard Investors • November 2016 • 5

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