Vanguard Tax-Managed Capital AppVMCAX

Morningstar Rating

Fund Research and Analysis

by Harry Milling

Vanguard Tax-Managed Capital Appreciation will do a yeoman's job.

This fund's 18% gain in 2009 as of Oct. 2 is hardly indicative of what to expect long term from this index tracker. Returns tend to be incremental and add up over time because of the fund's broad sector diversification over hundreds of stocks. Read more

Kudos

The fund's ultralow expenses give it a nice head start versus its peers.

The fund has been extremely tax-efficient and has never paid out a capital gains distribution.

Broad diversification. Read more

Risks

This fund's growth tilt means it may lag its peers when deep-value stocks shine. Read more

Strategy

Although this isn't an index fund, manager Michael Buek uses a sampling technique to match the key characteristics of the Russell 1000 Index. Its returns have tended to correlate very highly with those of its bogy. Read more

Management

Michael Buek, who has been with Vanguard since 1987 and has worked on index funds since 1991, has worked on this fund since its 1994 inception. He took over as lead manager in 2005. The fund's former manager, Gus Sauter, who also is Vanguard's CIO and index specialist, still supervises this offering and others run by Vanguard's quantitative equity group. Read more

Inside Scoop

A true index fund this is not. Although it aims to provide returns that equal those of the Russell 1000 Index over time, it will deviate from its bogy to limit its taxable distributions. Read more

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