R6| Monday, December 7, 2020 THE WALL STREET JOURNAL.
Mutual-Fund Yardsticks: How Fund Categories Stack Up
Includes mutual funds and ETFs for periods ended Nov. 30. All data are final.
Performance (%)
Investment objective November YTD 1-yr 5-yr*
Diversifiedstock&stock/bondfunds
Large-Cap Core 10.8 12.3 15.5 12.4
Large-Cap Growth 10.2 31.6 35.3 17.7
Large-Cap Value 14.0 0.3 3.0 8.5
Midcap Core 13.4 3.7 6.1 7.9
Midcap Growth 13.0 33.3 34.9 16.9
Midcap Value 15.7 –2.7 0.3 5.8
Small-Cap Core 16.6 1.3 4.1 7.2
Small-Cap Growth 14.8 27.1 29.2 14.7
Small-Cap Value 18.2 –3.6 –0.3 5.3
Multicap Core 11.5 11.73 14.7 11.3
Multicap Growth 11.8 36.1 38.8 17.2
Multicap Value 14.0 –1.5 1.1 7.4
Equity Income 12.0 1.0 3.8 8.8
S&P 500 Funds 10.9 13.6 17.0 13.5
Specialty Divers. Equity 11.4 17.9 21.1 15.0
Balanced 7.5 8.5 10.5 7.7
Stock/Bond Blend 8.3 8.5 10.8 7.9
Avg. U.S. Stock Fund† 13.4 12.9 15.8 11.5
Sectorstockfunds
Science & Technology 14.3 42.9 47.6 22.8
Telecommunication 11.9 20.4 23.7 9.5
Health/Biotechnology 10.1 21.3 25.2 10.9
Utility 4.0 –1.2 2.2 10.1
Natural Resources 27.0 –33.0 –26.5 –12.0
Sector 11.5 –2.2 –1.5 5.5
Real Estate 9.2 –6.8 –6.9 4.8Performance (%)
Investment objective November YTD 1-yr 5-yr*
Worldstockfunds
Global 12.1 13.2 16.7 10.2
International (ex-U.S.) 13.3 6.7 10.9 6.7
European Region 15.9 4.6 8.7 5.7
Emerging Markets 9.6 11.0 18.3 9.9
Latin American 20.5 –19.6 –10.9 7.6
Pacific Region 7.2 22.2 28.1 11.3
Gold Oriented –5.3 22.4 35.6 20.0
Global Equity Income 11.8 –1.3 1.6 6.2
International Equity Income 13.6 –3.0 0.9 4.8
Taxable-bondfunds
Short-Term 0.5 3.1 3.4 2.4
Long-Term 2.6 9.4 9.6 6.0
Intermediate Bond 1.4 7.8 7.8 4.4
Intermediate U.S. 1.0 7.8 8.2 3.6
Short-Term U.S. 1.4 7.8 7.8 4.4
Long-Term U.S. 0.6 9.8 8.9 4.2
General U.S. Taxable 2.2 6.1 6.7 5.6
High-Yield Taxable 3.9 3.5 5.4 6.2
Mortgage 0.4 3.6 3.7 2.8
World Bond 3.4 3.2 5.1 4.7
Avg. Taxable-Bond Fund** 1.9 4.7 5.4 4.1
Municipal-bondfunds
Short-Term Muni 0.1 3.0 3.1 1.6
Intermediate Muni 1.2 3.4 3.7 2.8
General & Insured Muni 1.8 3.9 4.2 3.7
High-Yield Muni 2.3 1.9 2.3 4.4Stock & Bond Benchmark IndexesAll total return unless noted
Perfomance (%)
Investment objective November YTD 1-yr 5-yr*
Large-capstocks
DJIA 12.1 6.1 8.1 13.5
S&P 500 11.0 14.0 17.5 14.0
Midcapstocks
S&P MidCap 400 14.3 6.7 9.7 10.0
Small-capstocks
Russell 2000 18.4 10.4 13.6 10.3
Broadstockmarket
DJ U.S. Total Stock Market 12.2 15.6 18.9 13.9
Russell 3000 12.2 15.7 19.0 14.0Performance (%)
Investment objective November YTD 1-yr 5-yr*
Stockindexes
DJ U.S. TSM Growth 10.8 31.4 35.1 18.2
DJ U.S. TSM Value 13.5 –1.5 1.3 9.0
Taxablebonds
Barclays Agg. Bond 1.0 7.4 7.3 4.3
Municipalbonds
Barclays Muni. Bond 1.5 4.6 4.9 3.9
Internationalstocks
MSCI EAFE†† (price return) 15.4 0.8 4.0 3.4
Dow Jones World (ex. U.S.) 13.4 5.8 10.3 7.6
*Annualized †Diversified funds only **Excludes money-market funds ††Europe, Australia, Far East Source: Refinitiv LipperHow the Largest Funds Fared
Performance numbers are total returns (changes in net asset values with reinvested distributions) as of
Nov. 30; assets are as of Oct. 30. All data are final.Stock Mutual Funds and ETFs
Total Return (%)
Assets Annualized
Fund Ticker ($ billions) October 1-year 3-year 5-year 10-year
Vanguard TSM Idx;Adm 9.2 921.44 12.2 19.1 13.2 14.0 14.0
Vanguard 500 Idx;Adm 8.92 557.01 11.0 17.4 13.1 14.0 14.2
Vanguard Tot I S;Inv 6.46 371.75 12.9 9.5 3.7 7.3 5.3
SPDR S&P 500 ETF 8.91 277.59 10.9 17.5 13.1 13.9 14.1
Fidelity 500 Index Fund 8.94 245.61 10.9 17.4 13.2 14.0 N.A.
Vanguard Instl Indx;InsP 8.93 231.63 10.9 17.5 13.2 14.0 14.2
American Funds Gro;A 11.02 218.05 12.3 34.0 17.9 16.9 15.3
iShares:Core S&P 500 8.92 209.46 11.0 17.4 13.1 14.0 14.1
American Funds Bal;A 4.13 166.15 7.0 10.4 8.3 9.2 10.1
American Funds EuPc;R6 9.66 161.25 13.4 22.4 8.8 10.5 8.1Bond Mutual Funds and ETFs
Total Return (%)
Assets Annualized
Fund Ticker ($ Billions) October 1-year 3-year 5-year 10-year
Vanguard Tot Bd;Adm 0.61 293.42 1.1 7.4 5.5 4.4 3.7
Vanguard Tot Bd II;Inv 0.6 204.55 1.1 7.0 5.3 4.2 3.5
Vanguard Tot Itl BI;Adm 1.1 157.36 0.3 3.7 5.0 4.3 N.A.
PIMCO:Income;Inst 3.01 125.30 2.7 5.6 4.4 5.8 7.2
MetWest:Total Rtn;I 1.26 89.02 1.2 8.7 6.1 4.7 4.6
Note: For funds with multiple share classes, only the largest is shown. N.A.: Not applicable; fund is too new or data not available Source: Refinitiv LipperTracking Exchange-Traded Portfolios
Performance figures are total returns for periods ended Nov. 30; for largest exchange-traded funds and
other portfolios, ranked by asset size.
Assets Volume Expense Launch Performance (%)
Fund Symbol ($ billions) (000s) ratio date November YTD 1-year
SPDR S&P 500 ETF SPY 322.49 80,850.1 0.09 01/22/93 10.9 14.0 17.5
iShares Core S&P 500 ETF IVV 234.69 4,074.8 0.04 05/15/00 11.0 14.0 17.4
Vanguard Tot Stk Mkt Idx ETF VTI 188.73 3,717.9 0.03 05/24/01 12.2 15.8 19.1
Vanguard 500 Index ETF VOO 177.32 4,156.8 0.03 09/07/10 11.0 14.0 17.4
Invesco QQQ QQQ 144.57 26,814.7 0.20 03/10/99 11.1 41.4 47.0
iShares Core US Aggregate Bond ETF AGG 83.43 8,654.7 0.05 09/22/03 1.0 7.3 7.2
Vanguard Developed Markets Idx ETF VEA 83.26 11,957.0 0.05 07/20/07 14.8 4.3 7.9
iShares Core MSCI EAFE IEFA 80.09 13,343.6 0.07 10/18/12 15.3 3.4 6.9
SPDR Gold Shares GLD 67.68 13,100.6 0.40 11/18/04 –6.4 15.3 20.2
Vanguard Emg Mkts Stk Idx ETF VWO 66.50 12,956.8 0.10 03/04/05 8.2 8.8 16.4
Vanguard Total Bond Market ETF BND 65.91 4,696.6 0.04 04/03/07 1.1 7.6 7.4
Vanguard Growth ETF VUG 65.33 747.4 0.04 01/26/04 10.5 34.5 38.7
iShares Russell 1000 Growth ETF IWF 62.03 1,165.9 0.19 05/22/00 10.2 32.2 36.1
*Expense charge is a maximum of 8 cents a share †Assets are estimated N.A.= Not applicable, fund is too new.
Note: Total returns are based on the change in the net asset values, not changes in market prices. Net asset values can vary from market prices, which
therefore can reflect a premium or discount to the net asset values. Source: Refinitiv LipperI
n the past few months, numerous well-known
companies have undergone stock splits, including
AppleandTesla.
In theory, a stock split shouldn’t matter one bit
for a company’s future returns. Cutting the price
per share of a company in half while doubling the
number of shares outstanding changes nothing
fundamental about the company, since its market
capitalization is exactly the same as it was before.
But examining the full list of stock splits over the
past 40 years highlights some interesting results.
Overall, the stocks of companies that split their
shares have significantly outperformed their bench-
mark over the subsequent months, earning an aver-
age of 1 percentage point more than the benchmark
over the six months after the split.
Yet, there is one period when buying into a stock
after it has split appears to go horribly wrong—when
exuberance among individual investors is high. In
years when equity markets were on a tear, buying
into a stock split cost an investor an average of more
than 6 percentage points in lost returns, compared
with the stock’s benchmark, one year after the split.Data since 1980
To undertake this study, Stephanie Fincher and Eric
Dzik (research assistants at George Mason Univer-
sity) and I examined a total 3,480 stock splits and
reverse stock splits since 1980 for U.S. stocks listed
on the Nasdaq or NYSE. We looked at the one-
month, six-month and 12-month returns for investors
who bought stocks that had just split or been partof a reverse split.
Returns were measured
against a portfolio of other
U.S. stocks with similar
market capitalization and
book-to-market ratios.
We found that stocks re-
turned 1 percentage point
more than their benchmark,
on average, over the six
months after a split and
0.82 percentage point over
12 months.
But those averages dis-
guise some big differences
in certain years. We looked
at years when stock owner-
ship by individual investors
was in the top 15% of yearly
observations over the sam-
ple period—1998, 1999,
2007, 2018, 2019 and 2020.
For these years, with equity
markets calling all investing
novices to come and buy in,
we found that stocks’ re-
turns averaged 2.95 per-
centage pointslessthan
their benchmark in the six
months after a split, and
6.12 points less than their
benchmark over 12 months.Reverse stock splits
Also of interest are the re-
sults that are associated
with reverse stock splits,when a company reduces
the number of listed shares
and increases the price per
share.
Although these are
much rarer than regular
stock splits, there were 304
reverse splits since 1980
that we examined.
The message here for in-
vestors is clear: We found
that stocks earned 1.18 per-
centage points less than
their benchmark on average
in the month after a reverse
split, 7.57 percentage points
less after six months and
12.02 percentage points less
over 12 months.
So as an investor, it mayvery well be worth it to buy
into a company that is
splitting its stock, as long
as individual investors
aren’t caught up in the
hype and partying like it’s
1999—or 2020. But if a
stock you hold is reverse-
split, this may be a sign
that things are going to get
way worse before they get
better.Dr. Horstmeyeris an
associate professor of
finance at George Mason
University’s Business
School in Fairfax, Va.
He can be reached at
[email protected].Abnormal returns(percentage points):
1-month 6-month 12-month
Variance of
1-year resultsDepends When It Happens
Companies that split their shares outperform against their
benchmark over subsequent months, but not when
individual-investor exuberance is high.*Individual Investor Boom Years are 1998, 1999, 2007, 2018, 2019, 2020
Note: Abnormal returns are measured from when the stock split happens, looking ahead one
month, six months and 12 months
Source: Derek Horstmeyer George Mason UniversityIndividual Investor Boom Years*Individual Investor Normal YearsStock Splits Overall
0.03 pt.-1.43
-2.95
-6.120.10
1.33
1.161.00
0.8218.2%47.2015.74When Stock Splits
Do—and Don’t—
Benefit Investors
A study reveals stock splits improve
future returns. With a big exception.BYDEREKHORSTMEYERJOURNAL REPORT|INVESTING IN FUNDS & ETFS
Are investorspaying too much
for target-date funds?
The funds offer a diversified
portfolio that automatically rebal-
ances as a goal like retirement or
college approaches. They are in-
creasingly popular in 401(k)s and
among younger investors.
But an academic paper cites
fees of an average of one-third of a
percentage point annually. Instead
of spending extra to have a target
fund manage their asset allocation,
investors should replicate the port-
folios using cheaper exchange-
traded funds, the authors write in
“Off Target: On the Underperfor-
mance of Target-Date Funds.”
The problem is that target funds
are funds that invest in other funds
(or “funds of funds”), say David
Brown of the University of Arizona
and Shaun Davies at the University
of Colorado Boulder. Each is a mini-
portfolio of underlying funds; each
can levy two levels of fees. About
20% of funds use this arrangement.
Profs. Brown and Davies identi-
fied two causes of target funds’ un-
derperformance compared to simi-
larly constructed portfolios of cheap
ETFs: fees and cash drag. The aver-
age ETF portfolio outperformed its
mirroring target fund by 0.08 to
0.11 percentage point each month,
or 0.93 to 1.28 points annually, be-
tween 2006 and 2017, the authors
found in an analysis representing
what an investor would pay on av-
erage if he or she chooses a target-
fund provider at random.
Most of the underperformance—
two-thirds of the effect—can be
traced to higher management fees
in target funds. “It is difficult to ra-
tionalize that our results simply re-
flect [target]-fund sponsors’ opera-
tional expenses,” the paper says.
These fees do seem to be falling
over time as target funds jostle for
market share.Vanguard Group,Fi-
delity Investments, Capital Group’s
American Funds,T. Rowe Price
andBlackRock—the five largest
target-fund companies, and the
majority of the market—don’t
charge double fees today, says Ja-
son Kephart, a multiasset-manager
research strategist at Morningstar.
“Our target retirement funds do
not levy additional fees beyond the
low-cost, underlying index-fund
strategies,” says Emily Farrell, a
spokeswoman for Vanguard. Fidel-
ity similarly defends its fees. “Our
target-date-fund pricing is very
competitive, with each Freedom
Fund charging shareholders for its
operating expenses directly with a
single top-line fee,” says Fidelity
spokesman Adam Banker.Ms. Schoenbergeris a writer in
New York. [email protected].Study Calls Out
The Costs of
Target Funds
BYCHANAR.SCHOENBERGERMIKEL JASO