Quant funds -- quant is short for quantitative -- use computer models rather than humans to pick stocks and are a growing segment of the fund market. They're also a natural extension for index pioneer Vanguard, which relies heavily on computers to manage its funds that simply seek to match their bogeys. Its quant funds, by contrast, seek to beat their benchmarks.
The latest addition to the Valley Forge, Pa., firm's computer-driven lineup is Vanguard Strategic Small Cap Equity. The fund (symbol VSTCX; 800-635-1511) cherry picks the most promising stocks in the MSCI US Small Cap 1750 Index using three models: one that focus on measures of value, such as price-earnings ratios; another that looks for stocks with upward price and earnings momentum; and a third that hunts for earnings growth.
Applying a quantitative strategy to small companies makes sense given that the options are vast and tiny firms attract less analyst coverage than large companies do. To curtail risk, Small-Cap Equity sticks with sector weightings identical to its benchmark. The fund's sprawling portfolio includes 450 stocks diversified across all sectors, so holdings range from Puget Energy, a utility, to women's clothing retailer Ann Taylor Stores to book dealer Barnes & Noble.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The same computer models power the engines of Strategic Small-Cap's older sibling, Vanguard Strategic Equity. That fund (symbol VSEQX), which invests in midsize companies, returned an annualized 12% over the past decade to February 1, an average of three percentage points per year more than the typical midsize-company fund. Like most Vanguard funds, Strategic Small-Cap Equity benefits from low expenses -- 0.40% per year. The fund, which began in April 2006, returned 7% from inception to February 1, two percentage points more than the average small-company fund.
-
5 Steps to Turn Your Nest Egg into a Retirement PaycheckSponsored Sponsored Content by Sensible Money
-
What’s Happening With Trump, Elon, Tesla, and the EV Tax Credit?Tax Credits There's a lot of chatter about the President-elect's plans to eliminate the electric vehicle tax credit. Here's what you need to know.
-
The 5 Best Actively Managed Fidelity Funds to Buy Nowmutual funds In a stock picker's market, it's sometimes best to leave the driving to the pros. These Fidelity funds provide investors solid active management at low costs.
-
The 12 Best Bear Market ETFs to Buy NowETFs Investors who are fearful about the more uncertainty in the new year can find plenty of protection among these bear market ETFs.
-
Don't Give Up on the Eurozonemutual funds As Europe’s economy (and stock markets) wobble, Janus Henderson European Focus Fund (HFETX) keeps its footing with a focus on large Europe-based multinationals.
-
Best Bond Funds to BuyInvesting for Income The best bond funds provide investors with income and stability – and are worthy additions to any well-balanced portfolios.
-
Vanguard Global ESG Select Stock Profits from ESG Leadersmutual funds Vanguard Global ESG Select Stock (VEIGX) favors firms with high standards for their businesses.
-
Kip ETF 20: What's In, What's Out and WhyKip ETF 20 The broad market has taken a major hit so far in 2022, sparking some tactical changes to Kiplinger's lineup of the best low-cost ETFs.
-
ETFs Are Now Mainstream. Here's Why They're So Appealing.Investing for Income ETFs offer investors broad diversification to their portfolios and at low costs to boot.
-
Do You Have Gun Stocks in Your Funds?ESG Investors looking to make changes amid gun violence can easily divest from gun stocks ... though it's trickier if they own them through funds.
