#ETF Scorecard, Vanguard Total World Stock ETF (VT: nyse)

January 31, 2014

The Vanguard Total World Stock ETF (VT) is an index fund that holds stocks and REITs issued by companies in the emerging and developed markets. Stocks from the frontier markets are excluded by the Fund. The following chart shows that VT is an established fund which efficiently manages its stock portfolio with the good prospect of sustaining its operations:

VTprofile

The following scorecard rates VT as a wealthy, tax efficient fund with several risks: 1) market volatility. 2) potential management error. 3) fluctuating exchange rates for foreign currency.

VTscorecard

Index

The FTSE All-World Index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalizations. The FTSE All-World Index is a market-capitalization weighted index of the large- and mid-cap stocks listed in developed and emerging markets; frontier markets are excluded. The stocks are selected and weighted to ensure that the GEIS is an ‘investable’ index.

Fund operations

VT operated a $3 billion, diversified portfolio of 800 stocks in the year 2013. Most of the stocks had large capitalizations (77% large cap, 13% mid cap, 10% small cap) and most were issued in developed markets. The regional distribution of stock issuers was greatest in North America & Europe (78%) followed by Asia (19%), Latin America (2%), and Africa (1%).

According to the ETF.com website (1), VT’s major competitors in 2013 were ACWI, ACIM, ACWV, HECO, and ONEF. Among these, VT offered the lowest annual expense ratio, 0.19%. VT, ACWI, and ACIM operated in very similar ways to match the performance of their market indices; their returns were tax-efficient. In comparison, ACWV, HECO, and ONEF sought to outperform the global equities market.

The following chart was found in the ETF.com website (1). Visual inspection of the chart gives an impression that the net asset value (NAV) of VT’s portfolio closely tracked the performance of its index (the underlying FTSE index) and the market segment’s index (MSCI All World Investable Markets + Frontier).

VTtracking

According to the ETF.com website (1), VT’s operations were less transparent than the competitors’ due to Vanguard’s practice of reporting holdings on a monthly rather than daily basis. Similar to other competitors, VT lent its portfolio holdings to help offset the Fund’s expenses. Institutional investors incurred a higher cost for buying creation units from VT than from other Funds.

Recommendation

VT is a good long-term investment.

References
#01. http://www.etf.com/, © ETF.com 2014


#ETFscorecard_SPY, SPDR S&P 500 ETF

July 12, 2013

SPY was the first exchange-traded index fund sold in the U.S. Stock Market.   Today’s investment goal remains the same from inception: to earn returns, before expenses, that correspond to the price and yield performance of the S&P 500 Total Return Index.  The S&P 500 index measures the intraday value of the 500 largest stocks listed in U.S. stock exchanges.  SPY’s annual expense ratio is 0.09% and the Fund is considered to be tax-efficient.   It is structured as a unit investment trust (UIT) to protect the Fund from management error.  The following profile and scorecard support a long-term investment in SPY.

Profile

SPY1

Scorecard

SPY2

Copyright © 2013 Douglas R. Knight


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