Vanguard Small Cap Index Adm: 5 Key Facts You Need to Know

Table of Contents

• Introduction
• Investment Objective and Strategy
• Performance Review
• Fund Fees and Expenses
• Comparison with Similar Funds
• Pros and Cons
• Tips and Tricks for Investing

Introduction

Vanguard Small Cap Index Adm (VSCAX) is a passively managed index fund that seeks to track the performance of the Russell 2000 Index. The fund invests in small-capitalization companies, which are typically defined as those with market capitalizations below $2 billion.

Investment Objective and Strategy

VSCAX aims to provide investors with long-term capital appreciation by investing in a diversified portfolio of small-cap stocks. The fund tracks the Russell 2000 Index, which is a market-capitalization-weighted index of approximately 2,000 of the smallest publicly traded companies in the United States.

Performance Review

Since its inception in 2001, VSCAX has generated an average annualized return of 11.14%. This compares favorably to the Russell 2000 Index, which has returned 10.54% over the same period.

Table 1: Performance Comparison

Risk: Small-cap stocks tend to be more volatile than large-cap stocks and may be subject to greater price fluctuations. VSCAX is considered to be a higher-risk investment than large-cap index funds.

Fund Fees and Expenses

VSCAX has a low expense ratio of 0.14%, which is significantly below the average expense ratio for actively managed small-cap funds.

Table 2: Fund Fees and Expenses

Comparison with Similar Funds

VSCAX is one of several small-cap index funds available to investors. Some similar funds include:

Table 3: Comparison with Similar Funds

Note: Returns are as of March 31, 2023.

Pros and Cons

Pros:

• Low expense ratio
• Diversified portfolio of small-cap stocks
• Tracks a well-known and established index
• Long-term track record of solid performance

Cons:

• May be subject to higher volatility than large-cap index funds
• Limited potential for alpha generation (outperforming the benchmark)

Tips and Tricks for Investing

• Consider your investment goals and risk tolerance: Small-cap stocks can be volatile, so it's important to ensure that VSCAX aligns with your investment objectives and risk appetite.
• Invest for the long term: Small-cap stocks tend to perform better over longer time horizons. Consider holding VSCAX for at least five years or more.
• Use dollar-cost averaging: This strategy involves investing a fixed amount of money in VSCAX at regular intervals. This helps to reduce the impact of market volatility.
• Rebalance your portfolio regularly: As your investments grow, it's important to rebalance your portfolio to maintain your desired asset allocation. This may involve selling some VSCAX and investing the proceeds in other assets, such as bonds or large-cap stocks.

Conclusion

Vanguard Small Cap Index Adm (VSCAX) is a low-cost and well-diversified index fund that provides investors with exposure to small-capitalization stocks. The fund has a strong track record of performance and is a suitable option for investors seeking long-term capital appreciation and diversification. As with any investment, it's important to consider your investment goals, risk tolerance, and time horizon before investing in VSCAX or any other fund.