Weighted Average Tells You

No one is going to dispute Vanguard’s access to information or execution. Let’s take this Growth Fund, ticker VAGSX.

a. In the table below, Category Allocation 70-80% Equity, let’s take that as given.
b. Means that if you wanted 60% equity on $100, you give them $80, and buy $20 of bonds (or some other set of other assets, but let’s just use one), call that AGG, which is the most diverse US dollar bond fund (old Lehman Aggregate, the standard-bearer). That’s a shortcut here, because there are other countries on the planet that issue bonds. (Source: yahoo.com finance)

Now, we get their VASGX result.

YTD = 7.15%
Remember Finance 701, the post? S&P YTD = 21.64%. It shows the crazy breadth even within “stocks” around the world, the return of the US S&P has exceeded everything, which has made the Glue (from the last post) look…unhinged a bit.

If you look at the Top Holdings below, you will see my point from Finance 701, there are MANY things called “stocks.” You can see it in “Top Holdings.”

Back to our exercise

If you bought $80 of VASGX, you are buying $80 x 31.86% Intl Stock Index = $25.488 of VGTSX (because VASGX buys other Vanguard funds, so you are paying multiple layers of Vanguard fees, hello). And so on, down the list

Now for the AGG (the bond portion)

-.84% YTD and if there are international bonds, it is WORSE due to foreign exchange translations, but let’s leave it at -0.84% and you have bought $20 (you used $80 on VAGSX).