Investments Essay Example: Vanguard Investment Management Company

Investment objective:

The investment objective of Vanguard 500 index fund investor share aims at tracking the performance of a benchmark index which measures the investment return of large-capitalization stocks. The fund incorporates an indexing investment approach which employs a tracking a tracking style to track the performance of the standard & Poors 500 Index which is a hugely acknowledged standard in the U.S. stock market performance which is populated by the stocks of large U.S. companies. Vanguard 500 Index avails a broadly representative and well-diversified exposure to U.S. large-cap stocks. Ideally, the fund presents an investor with a favorable and affordable means of gaining a diversified exposure to the U.S. equity market. As a matter of fact, the standard benchmark of Vanguard 500 Index Fund Investor Shares (VFINX) happens to be one of the most popular index in stock market. The S&P 500, essentially banks on the top 500 of the largest companies in the United States in the market. In the same manner, VFINX is also highly spread out over a vast array of sectors such as financials, health care, industrials, IT as well as consumer goods and services. With an investment of $100,000 Vanguard 500 Index would be divided into an equity fund of half the amount. The bond fund on the other hand would have a 30 percent allocation while the global fund would receive a 10 percent allocation. The remaining cash would go into cash.

Vanguard investment Management Company is headquartered in Malvern, Pennsylvania. Vanguard is apparently the parent company which is actually the largest mutual fund provider in the United States. Among other mutual funds provided by the company includes the exchange-traded funds popularly known as exchange-traded funds. The company has been known to trade low-cost index commodities through its wide array of array of stocks it offers in different market. The low-cost initiative adopted by the company is primarily the reason behind the massive investments in assets into funds over a span of a decade. Another way to see the reason why Vanguard focuses on low cost options is the fact that it seeks to gain a diversified exposure to the U.S. equity market. The Vanguard 500 Index Funds monitors one of United States popular standards and Poors 500 index. S&P 500 comprises of about 80 percent of the investable market capitalization of U.S. equity market. From a close point of view, the fund follows the likes of S&P 500. However, the only differentiating factor between the return of the fund and the index is the expense ratio. Vanguard 500 Index had by October 16, 2017 an asset base amounting to about $351.84 billion invested in about 514 different holdings. After trailing for about twelve months, Vanguard 500 Index Fund was placed at 33 percentile of large-blend category at Morningstar. Moreover, for the past three years, the fund falls at seventh percentile while the past five years, the fund has held the 13 percentile. For a decade now, the fund has consistently held the 23 percentile. The expense ratio however, has been in the overall stricken an ultra-low rate of about 0.05 percent. However, the fund has an offer of an investor share class with a lower minimum with a slightly higher expense ratio. Compared with other stocks, Vanguard fund has lay low reaching a ratio of below average for the better half of the decade. With this said, the return level has been ranked high and above average for the past five to ten years. By January 2017, the fund had holdings with a market capitalization and sectors which were equivalent to the benchmark standard index of the fund.

Expense ratio

Ideally, all mutual funds as well as exchange-traded funds (EFTs) levy an expense ratio which is meant to compensate the total annual operating expenses of the fund investment. The fund expense ratio takes into account the operating costs such as administrative, compliance, distribution, management, marketing, shareholder service among other costs. Ideally, it is computed annually as a percentage of the average net assets. The shareholder reports showcases the ratio. As an expenses, it depletes the returns of shareholders and eats away the value of investments. A decrease in the expense ratios results from factors such as waiving expenses which are set in place to always ensure that the outcomes are positive as well as due to economies of scale.

Beta

Beta and volatility are related in the sense that beta is a factor useful in assessing the riskiness or volatility of a portfolio. The higher the beta, the more risky a portfolio is.

Year to date (YTD)

Right from day 1 of the fiscal year to the present date, the YTD can be computed in be used in analyzing, comparing and computing important metrics of investment returns, earnings, incomes etcetera as determined by various business trends. The return obtained from computing the year to date return can be obtained by getting the difference between the initial value and dividing the resultant outcome by the starting value. If an investment can generate profit right from the beginning of the current calendar year to the current period, then, the year to date returns of the portfolio can be obtained.

Dividend yield.

When considering viable ventures to allocate funds and resources, not all portfolio qualify as potential ventures. There are some considerations which an investor ought to put into consideration. Dividend yield is one of the must consider ratio that investors to consider when making decision on what stocks to invest in. Ideally, this is because investors ought to establish the return they obtain from the investments they venture into. From the earnings that a company gets, a certain portion is allocated to the dividends and that is the dollar value from which the company pays earnings to investors. The dividend yield is computed as annual dividend divided by the current stock price. For Vanguard 500 Index the cash which has an allocation of 10percent of the investment portfolio of $100,000 would receive a dividend amount

References

MutualFunds.com. Vanguard 500 Index Investor. Retrieved from http://mutualfunds.com/funds/vfinx-vanguard-500-index-investor/Frino, A., & Gallagher, D. R. (2001). Tracking S&P 500 index funds. The Journal of Portfolio Management, 28(1), 44-55.

Kostovetsky, L. (2003). Index mutual funds and exchange-traded funds. The Journal of Portfolio Management, 29(4), 80-92.

Morck, R., & Yang, F. (2001). The mysterious growing value of S&P 500 membership (No. w8654). National Bureau of Economic Research.

Beneish, M. D., & Whaley, R. E. (2002). S&P 500 index replacements. The Journal of Portfolio Management, 29(1), 51-60.

Gastineau, G. L. (2004). The benchmark index ETF performance problem: a simple solution. ETFs and Indexing, 2004(1), 62-69.

Poterba, J. M., & Shoven, J. B. (2002). Exchange traded funds: A new investment option for taxable investors (No. w8781). National bureau of economic research.