#4 – Diversified Equity (VDEQX)
| Diversified Equity (VDEQX) is one of Vanguard’s newer funds of funds. But instead of investing entirely in index funds, like many of the others, this one invests in a portfolio of eight actively managed Vanguard funds. That adds up to a lot of managers.
Unfortunately, some of the best managers, such as PRIMECAP Management, weren’t included, and one of the worst, namely AllianceBernstein of U.S. Growth, was. For the moment, that makes it easy for Vanguard to claim active management doesn’t work, but it’s not what I’d call a fair fight. Based on back-testing — and not surprisingly with around 20 management teams — the fund should perform almost like a clone of Total Stock Market. But whichever way you cut it, my model portfolios have put this fund and the market index fund to shame, so I don’t recommend it. |
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