Active Versus Passive Management
Read Chapter 11: Overview of Equity Portfolio Management.
Read SPIVA U.S. Year-End 2021Links to an external site.. For additional background on this article, be sure to
click on the link at the bottom of the article: Download Full Article.
Select five actively managed equity funds or ETFs.
Read the following resources, which provide assistance in selecting actively managed funds or ETFs:
5 Actively Managed Vanguard Funds to Own for the Long HaulLinks to an external site.
7 Best Actively Managed ETFs: Investors Should Look Beyond Index Funds to More Tactical OptionsLinks to an external site.
Week 2_Select Actively Managed Funds or ETFs on Vanguard
You may also review the following webpages in order to select your five actively managed equity funds:
Schwab Active Equity FundsLinks to an external site.
Blackrock Investment FundsLinks to an external site.
Be sure the “Fund type” is set to “active” and the asset class is set to “equity” if using this resource for this assignment.
In your paper,
Create a table that summarizes the return performance of the five funds you selected compared to their indexes.
Include four time periods for each of the five funds (e.g., 1-year, 3-year, 5-year, and 10-year).
Include the return performance over the same four time periods of each fund’s designated benchmark index.
For assistance with creating your table, refer to Tables, Images, and AppendicesLinks to an external site. if
needed.
Explain the return performance of the five actively managed funds compared to their index.
Explain if the five funds you chose consistently generate alpha (e.g., “beat” the market).
Evaluate the pros and cons of active management for an equity portfolio.
Include two scholarly sources to support your analysis.
Evaluate the pros and cons of passive management for an equity portfolio.
Include two scholarly sources to support your analysis.
Sample Solution
For this assignment, I decided to select five actively managed equity funds or ETFs from Vanguard. The first fund I chose was the Vanguard Value Index Fund Investor Shares (VIVAX). This fund invests in stocks of large- and mid-cap U.S. companies that have strong financial characteristics and attractive valuations. The second fund is the Vanguard International Growth Fund Investor Shares (VWIGX). This fund seeks to achieve long-term capital appreciation by investing primarily in a diversified portfolio of non-U.S. stocks with growth potential that are undervalued relative to their peers as identified by quantitative measures and fundamental analysis.
The third fund is the Vanguard Dividend Appreciation Index Fund ETF Shares (VIG). This ETF seeks long-term growth of capital by investing in common stocks of companies that have a history of increasing dividends over time, providing investors with an opportunity for steady income along with capital appreciation. Fourthly, I chose the Vanguard High Dividend Yield Index Fund Admiral Shares (VHYAX). This fund focuses on dividend yields from a variety of sectors while attempting to limit downside risk during market downturns.
Lastly, I selected the Vanguard Mid Cap Growth Index Fund Admiral Shares (VMGMX), which tracks an index made up of more than 450 medium-sized U.S.-based companies whose stock prices have been growing faster than average compared to other mid cap stocks over time.
Overall then, after reading various resources addressing how best to choose actively managed funds or ETFs from Vanguard — such as those mentioned at the beginning—I felt confident enough selecting these five funds given their respective capabilities allowing me potentially benefit my investment portfolio without taking too many risks.
