Zvi Bodie's asset allocation

"Elle" wrote

Post-o, it is 20%.

Reply to
Elle
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I have never looked at VIG but I believe it's a relatively new ETF. If that's the case you should look at the average assets month to month. If they've grown a great deal during the period being reported, it inflates the turnover figure.

-Tad

Reply to
Tad Borek

Sorry, I'm a little confused now. I see that Mergents has a Broad Dividend Achievers index (which is the source I typically use) and a Dividend Achievers Select index. Is there another or do you have an extra word above? The reason I ask is that it would be a really good match to one of the investment strategies I already use if it is the former.

-Will

william dot trice at ngc dot com

Reply to
Will Trice

Post-o by me. Per the Vanguard web site, VIG is "designed to track the performance of the Dividend Achievers Select Index [symbol DVG]. This index is a subset of the Broad Dividend Achievers Index [symbol DAA] and is administered exclusively for Vanguard by Mergent, Inc. The fund attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index."

The dividendachievers.com site does not explain the difference very well, if at all, from my quick check. DAA holds 215 stocks. DAA holds 319 stocks. I'd be searching the two sites (Vanguard's and dividendachievers.com's) like anyone else to glean more info. I have yet to buy any fund specialized in dividend growth, though I do consider them a few times a year. About a year ago I did take note of some div achievers ETFs offered by Powershares.com. In particular, its international dividend achieving fund, PID.

Reply to
Elle
[Thanks for further looking into VIG, and my apologies for not having gotten back to it sooner]

It appears that that's likely a very misleading number.

Yahoo and Morningstar are still showing 42%. Vanguard's "Holdings page, as of 12/31/07" says 20% (now) Vanguard's semi-annual report (7/2007) says 2% ("annualized")

The numbers are probably still evolving - this is a small and relatively new fund still - From 3/06 - 1/07 it grew from _zero_ to $274million from 1/07 - 7/06 it grew from $274MM to $418MM

Bearing in mind that the reported turnover is derived using the net assets as the denominator, a small and/or very fast changing denominator may make a mess of those numbers (depending on actual calculation details). It's no surprise that we can't seem to get a very solid stable answer from the various sources for this number right now. In time, and given how the index itself is composed, I don't expect turnover for this fund to be quite as low as, say, the S&P500, but it should be substantially lower than any typical actively managed (even a relatively low-turno) one.

Which is a subset of the broader Div Achievers index, but the details of the filter which narrows it down are apparently not public.

Anyway, as an inflation hedge - a somewhat risky one, as would be any equity investment - the more I examine VIG, the more I like it. I'd really love to hear what Bodie would have to say about it...

Reply to
BreadWithSpam

I believe Mergents bought the Dividend Achievers franchise from Moody's (or perhaps Mergent was spun off of Moody's) back in 2004, so results probably go back to the Moody's days.

-Will

william dot trice at ngc dot com

Reply to
Will Trice

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seems to suggest otherwise. Hmm, you're right. I guess that they applied their selection guidelines going back ten years to see what the index theoretically would have been. That seems kind of like they were cherry picking a time period since they presumably could have gone back to 1979 when the Dividend Achievers list was established and reported those results...

-Will

william dot trice at ngc dot com

Reply to
Will Trice

VDIGX is actively managed and has been around a lot longer. It's also got only about a fourth as many holdings, though spread out more evenly between them (because VIG is weighted on a modified market-cap scale). The upshot of all that is that expected turnover in VDIGX should be substantially higher than in VIG. And VDIGX's reported turnover number, since it's long established and fairly stable fund, should be reasonbly accurate. The reported turnover numbers (the variety of them) for VIG probabl won't have much meaning until it stabilizes, and given the (general) method of index construction, that turnover should be pretty low.

That all said, I'm a bit surprised by the returns volatility (and the two-years-in-a-row huge losses) for VDIGX and hope that VIG will do better. The backtested index on Mergent's site surely indicates that it would have.

Lastly, re: inflation hedge for these versus TIPS, these funds both throw off dividend yields of around 1.9%, substantially above the "real" yield across the whole TIPS yield curve (even the 20yr tips only have 1.7%). Given a reasonable expectation that these dividends will grow at at least the rate of inflation, if one is satisfied with the dividend (ie. one's expenses are tied to divs, not principal), these should be a superior inflation hedge over longer periods, bearing in mind, of course, normal volatility of equity prices - which don't matter very much as long as you don't have to sell any and can live off those dividends.

Reply to
BreadWithSpam

"Will Trice" wrote On Moody's, Mergent and their Dividend Achievers stocks:

My feeling through all this is that dividend achieving stocks largely or entirely are simply a value stock (in the Grahamian sense) portfolio. Graham style value stock picking historically has been very successful, as Tad often points out. Right now, I doubt cherry picking the timeframe would have been necessary. Admittedly a more complete picture is always nice. I would love to see a report on the 1989-1994 period or so in particular, since I think what's happening today with banks mirrors that period well. It's largely an academic matter but it might "soothe the beast" of those who are cussing about buying into the S&P at a peak last summer.

Reply to
Elle

wrote On a fund's stock turnover rates:

This may be the general trend. Yet I need more info to bet it would always apply. I would have to know more about the criteria for VIG and VDIGX. In particular, both are about half giant caps and a third large caps. Weighting may mean the two funds have considerable overlap every year. Meaning turnover may be similar.

We may be overfocused on turnover, though. Buying VIG where one may pay a bit more (or not; remains to be seen) in capital gains each year may still be far superior to holding a few individual positions or even 30 positions where one periodically adjusts the portfolio.

I am not sure. Does the mere fact that a fund has been around a long time mean its turnover rate will not vary much? In particular, turnover is going to depend on economic conditions. Who is cutting a dividend, and so forth, will depend on the climate for each sector blah blah. I think it is too hard to say without seeing each of the last ten year's numbers.

snip for brevity

That's what my eccentric, but often right on with stocks, relative says. :-) The numbers above make the point even better.

Reply to
Elle

Elle,

In those days the fund was a utilities sector fund. I've forgottem when they switched to the current objective.

JB

Reply to
JB

"JB" wrote Regarding VDIGX, Vanguard's Dividend Growth Fund

This is helpful. Consistent with what you say, I see that the Vanguard site states: "Effective December 6, 2002, [VDIGX] changed its investment objective and concentration policy. Prior to making these modifications, the fund was called Vanguard Utilities Income Fund, reflecting its former policy of investing in income-producing stocks of utilities companies. The performance prior to December 6, 2002 reflects the fund's performance under its former investment objective and concentration policy."

This would explain the long term graph of VDIGX at yahoo. VDIGX did not track the S&P very well until about 2003 (doh). As I wrote earlier, I expect a true "dividend achieving portfolio" to follow the S&P for the most part.

Reply to
Elle

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