Vanguard Extended Market Index Trust: A Comprehensive Guide

Introduction

The Vanguard Extended Market Index Fund (VEXAX) is a passively managed mutual fund that tracks the performance of the CRSP US Large Cap Extended Market Index. This index includes companies that are not included in the S&P 500 Index, but are still among the largest 1,500 publicly traded companies in the United States. As of December 31, 2022, VEXAX had $177.6 billion in assets under management and an expense ratio of 0.04%.

Investment Strategy

VEXAX invests in a broad range of large-cap stocks, including companies from the following sectors:

• Financials (23.6%)
• Technology (18.9%)
• Industrials (13.0%)
• Consumer Discretionary (12.3%)
• Healthcare (11.4%)
• Consumer Staples (8.7%)
• Energy (7.1%)
• Utilities (4.9%)
• Materials (4.4%)
• Real Estate (3.7%)

VEXAX's portfolio is weighted by market capitalization, with the largest companies having the most influence on the fund's performance. The fund is rebalanced quarterly to ensure that it remains aligned with the target index.

Performance

Since its inception in 2000, VEXAX has outperformed the S&P 500 Index by an average of 0.5% per year. Over the past 10 years, VEXAX has returned an annualized 10.2%, compared to 9.7% for the S&P 500 Index.

Benefits of Investing in VEXAX

• Broad exposure to the US stock market: VEXAX provides investors with access to a wide range of large-cap stocks, including many companies that are not included in the S&P 500 Index.
• Diversification: VEXAX's portfolio is well-diversified across sectors and industries, which can help to reduce risk.
• Low cost: VEXAX has a low expense ratio of 0.04%, making it one of the most affordable large-cap index funds available.
• Long-term performance: VEXAX has outperformed the S&P 500 Index over the long term, making it a good choice for investors with a long-term investment horizon.

Risks of Investing in VEXAX

• Market risk: Like all stock funds, VEXAX is subject to market risk, which means that the value of the fund can fluctuate based on changes in the overall stock market.
• Interest rate risk: VEXAX's portfolio includes a number of interest-rate sensitive stocks, which means that the fund could be negatively impacted by rising interest rates.
• Credit risk: VEXAX's portfolio includes a number of companies with lower credit ratings, which means that the fund could be negatively impacted by defaults or downgrades.

Who Should Invest in VEXAX?

VEXAX is a good choice for investors who are looking for:

• Broad exposure to the US stock market
• Diversification
• Low cost
• Long-term performance

How to Invest in VEXAX

VEXAX can be purchased through a variety of channels, including:

• Vanguard's website
• Vanguard's mobile app
• Financial advisors
• Brokerage firms

Frequently Asked Questions

1. What is the difference between VEXAX and the S&P 500 Index?

VEXAX tracks the CRSP US Large Cap Extended Market Index, which includes companies that are not included in the S&P 500 Index. VEXAX's portfolio is also more diversified than the S&P 500 Index, with a larger number of stocks from smaller companies.

2. How much does it cost to invest in VEXAX?

VEXAX has a low expense ratio of 0.04%. This means that for every $1,000 invested in VEXAX, you will pay $0.40 in annual fees.

3. What is the minimum investment amount for VEXAX?

There is no minimum investment amount for VEXAX. You can invest as much or as little as you want.

4. How often is VEXAX rebalanced?

VEXAX is rebalanced quarterly to ensure that it remains aligned with the target index.

5. What is the expected return for VEXAX?

VEXAX's expected return is based on the performance of the CRSP US Large Cap Extended Market Index. Over the long term, the index has returned an average of 10.2% per year. However, it is important to note that past performance is not a guarantee of future results.

6. What are the risks of investing in VEXAX?

VEXAX is subject to market risk, interest rate risk, and credit risk. Market risk is the risk that the value of the fund will fluctuate based on changes in the overall stock market. Interest rate risk is the risk that the fund will be negatively impacted by rising interest rates. Credit risk is the risk that the fund will be negatively impacted by defaults or downgrades.

7. Who should invest in VEXAX?

VEXAX is a good choice for investors who are looking for broad exposure to the US stock market, diversification, low cost, and long-term performance.

8. How can I invest in VEXAX?

VEXAX can be purchased through a variety of channels, including Vanguard's website, Vanguard's mobile app, financial advisors, and brokerage firms.