A Mid-Cap Fund With a Purpose
As mid-cap funds go, this one is an odd duck, but it earns top marks.
As mid-cap funds go, Vanguard Extended Market ETF (VXF) is an odd one. The S&P Completion Index that this fund follows is an amalgamation of two groups of stocks: all of the large-cap U.S. stocks that do not meet the inclusion rules of the S&P 500 and all of the mid-, small-, and micro-cap stocks that are too small for that index. In other words, it holds nearly all U.S. stocks--about 3,300 in total--that are not constituents of the S&P 500. As such, it skews much further down the market-cap spectrum than do others in its cohort. Peculiarity aside, the fund's benchmark is reasonably representative, and its fee is low. These two factors leave VXF well-positioned to continue its long streak of producing superior risk-adjusted returns relative to its peers over the long haul and underpin its Morningstar Analyst Rating of Gold.
During the 10-year period ended Sept. 30, 2016, VXF returned 8.27% per year, outstripping the U.S. mid-blend Morningstar Category average by 1.48 percentage points per year. Much of this relative outperformance can be attributed to the fund's sizable fee advantage. At 0.09%, VXF's annual levy is a tiny fraction of the 0.97% median fee charged by its category peers.
Ben Johnson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.