Vanguard Small-Cap Index has some great features. Its well-diversified portfolio and rock-bottom expense ratio should provide a sustainable edge over its Morningstar Category peers. But small-cap stocks are less liquid than large caps, so forced trades can impart additional costs to index-tracking strategies. Although the fund takes prudent steps to mitigate these costs, its lowest-cost share classes warrant a Morningstar Analyst Rating downgrade to Silver from Gold.
Will VSMAX outperform in future?
Get our overall rating based on a fundamental assessment of the pillars below.
The Process Pillar is our assessment of how sensible, clearly defined, and repeatable VSMAX’s performance objective and investment process is for both security selection and portfolio construction.
The People Pillar is our evaluation of the VSMAX management team’s experience and ability. We find that high-quality management teams deliver superior performance relative to their benchmarks and/or peers.
The Parent Pillar is our rating of VSMAX’s parent organization’s priorities and whether they’re in line with investors’ interests.