Vanguard versus the Enhanced Indexers, DFA, RAFI, and WisdomTree: Is Traditional Indexation Passé?
22 Pages Posted: 12 Dec 2012
Date Written: November 20, 2012
Vanguard provides low cost cap-weighted mutual funds: traditional index funds. The asset allocation of DFA’s core funds is determined by fundamentals as well as market cap. RAFI’s allocation depends on four fundamental factors — dividends, cash flow, sales, and book equity value. WisdomTree’s is also determined by fundamentals alone. We compare them with corresponding Vanguard mutual fund portfolios. We examined fund returns from March 2007 through June 2012. Focusing on US funds only, DFA and RAFI had lower returns than portfolios of Vanguard funds that mimicked their style; WisdomTree out-returned Vanguard. Thus, some, but not all fundamental indexers have performed well.
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