Vanguard Mid-Cap Index Fund ETF Shares (VO)

ETF Vanguard Mid-Cap Index Fund ETF Shares (VO)

Profile

Overview: The Vanguard Mid-Cap Index Fund ETF Shares (VO) is a passively managed ETF that tracks the performance of the CRSP US Mid Cap Index. It invests in publicly traded mid-cap stocks across various sectors, aiming to provide investors with broad exposure to the US mid-cap market.

Target Sector: Mid-cap stocks (market capitalization between $2 billion and $10 billion)

Asset Allocation: Primarily stocks (over 99%) with minimal exposure to other asset classes.

Investment Strategy: Replication - Seeks to closely track the performance of its benchmark index.

Objective

The primary objective of VO is to provide investors with long-term capital appreciation through exposure to the US mid-cap market. It aims to achieve this by replicating the performance of the CRSP US Mid Cap Index, offering investors a cost-effective and diversified way to invest in mid-cap stocks.

Issuer

Issuer: The Vanguard Group, Inc.

Reputation and Reliability: Vanguard is a highly reputable and reliable investment firm with a long history of providing low-cost, high-quality investment products. Founded in 1975, Vanguard is the second-largest asset manager globally, known for its commitment to investor interests and transparent, low-fee investment solutions.

Management: Vanguard employs a team of experienced portfolio managers and analysts who oversee the ETF's construction and management. The team has a proven track record of successfully managing index funds and ETFs.

Market Share

VO is one of the largest mid-cap ETFs in the market, with a market share of approximately 8% as of November 2023.

Total Net Assets

As of November 2023, VO has total net assets of approximately $210 billion.

Moat

Competitive Advantages:

• Low Expense Ratio: VO has a low expense ratio of 0.04%, making it one of the most cost-effective mid-cap ETFs available.
• Track Record: With a long history of success, VO consistently tracks its benchmark index closely, providing investors with reliable performance.
• Diversification: By investing in a wide range of mid-cap stocks across various sectors, VO offers investors significant diversification benefits.
• Liquidity: VO is a highly liquid ETF with high trading volume, making it easy for investors to buy and sell shares.

Financial Performance

Historical Performance: VO has historically delivered strong returns, outperforming its benchmark index in several periods. Over the past 10 years (as of November 2023), VO has generated an annualized return of approximately 10.5%, exceeding the CRSP US Mid Cap Index's return of 9.8%.

Benchmark Comparison: VO consistently tracks its benchmark index closely, demonstrating its effectiveness in replicating the target market's performance.

Growth Trajectory

VO's growth trajectory is closely tied to the overall performance of the US mid-cap market. This market segment has historically exhibited strong growth potential, making VO a suitable investment option for investors seeking long-term capital appreciation.

Liquidity

Average Trading Volume: VO has a high average daily trading volume, exceeding several million shares. This indicates its high liquidity and ease of buying and selling shares.

Bid-Ask Spread: VO has a narrow bid-ask spread, typically less than 0.01%, implying low trading costs for investors.

Market Dynamics

Economic Indicators: Economic growth and interest rate trends significantly impact the mid-cap market. Strong economic growth tends to favor mid-cap companies, while rising interest rates can put pressure on their growth prospects.

Sector Growth Prospects: The performance of specific sectors within the mid-cap market can affect VO's performance. Investors should consider the growth potential of various sectors when assessing VO's outlook.

Current Market Conditions: Market volatility and investor sentiment can influence mid-cap stock prices. Understanding current market conditions is crucial for evaluating VO's potential performance.

Competitors

Key competitors of VO include:

• iShares CORE S&P Mid-Cap ETF (IJH): Market share – 7%, Expense Ratio – 0.05%
• Schwab Total Stock Market Index (SWTSX): Market share – 6%, Expense Ratio – 0.03%
• SPDR S&P MidCap 400 ETF (MDY): Market share – 5%, Expense Ratio – 0.04%

Expense Ratio

VO has a low expense ratio of 0.04%, making it one of the most cost-effective mid-cap ETFs available.

Investment Approach and Strategy

Strategy: Replication - VO aims to closely track the performance of the CRSP US Mid Cap Index.

Composition: VO primarily invests in mid-cap stocks, with over 99% of its assets allocated to this asset class. The remaining holdings may include small amounts of cash or other liquid assets.

Key Points

• Low-cost: Expense ratio of 0.04%
• Diversification: Broad exposure to the US mid-cap market
• Track record: Consistent performance in replicating the benchmark index
• Liquidity: High trading volume and narrow bid-ask spread

Risks

• Market Volatility: Mid-cap stocks can be more volatile than large-cap stocks, leading to potential fluctuations in VO's value.
• Market Risk: VO's performance is tied to the overall performance of the mid-cap market, which can be affected by various factors.
• Index Tracking Error: While VO aims to track its benchmark index closely, there may be slight variations in performance due to factors such as tracking methodology and trading costs.

Who Should Consider Investing?

VO is suitable for investors seeking:

• Long-term capital appreciation: Investors aiming to grow their wealth over the long term.
• Exposure to the US mid-cap market: Investors seeking diversified exposure to mid-cap stocks across various sectors.
• Low-cost investment solution: Investors seeking a cost-effective way to invest in mid-cap stocks.

Fundamental Rating Based on AI

Rating: 8.5 out of 10

Justification: VO scores highly due to its low expense ratio, strong track record, consistent performance, and high liquidity. Additionally, its broad exposure to the mid-cap market and the competitive advantages offered by its issuer further strengthen its position. However, investors should be aware of the inherent risks associated with mid-cap stocks and market volatility.

Resources and Disclaimers

Resources:

• Vanguard Mid-Cap Index Fund ETF Shares (VO): https://investor.vanguard.com/etf/profile/VO
• CRSP US Mid Cap Index: https://www.crspdata.com/crsp-indexes/crsp-us-mid-cap-index

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Before making any investment decisions, consult with a qualified financial advisor.