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Vanguard Files to Launch Extended Market ETF

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Indexing giant Vanguard today filed with the SEC to launch an extended market exchange-traded fund (ETF) tied to the Wilshire 4500 index. As with the recently-released Total Stock Market VIPERs (Vanguard Index Participation Equity Receipts), the extended market ETF will be a separate share class of an existing traditional Vanguard index fund.

The Wilshire 4500 index is a cap-weighted benchmark of mid- and small-cap stocks. Specifically, it includes all companies in the Wilshire 5000 total market index, excluding S&P 500 stocks. Vanguard launched an index fund based on the Wilshire 4500 in 1987.

The extended market ETF will be launched sometime in late summer or early fall, according to a Vanguard spokesperson.

Russell indexes in black in 2Q

All of Russell's 21 equity indexes posted positive gains in the second quarter after a cold winter.

"This quarter shows that it's difficult to time the market," said David Hintz, Russell analyst. "Investors were rewarded if they stayed on course with appropriate risk tolerance through a scary winter and early spring. Some investors who lacked this discipline were punished."

Small-caps led the charge in the second quarter, and have outperformed large-caps in 7 out of the last 10. Small-cap stocks tracked by the Russell 2000 outpaced large-caps in the Russell 1000 10.4% to 5.0%, respectively, for the quarter.

Also, the performance gap between growth and value narrowed in 2Q. "Many managers have spread their bets more widely, thinking there's no obvious place to be right now," said Hintz.

The lines are getting blurry . . .
2Q 2001
Russell 3000 Total Market
Russell 3000 Growth
Russell 3000 Value

2Q returns as of 6/27/2001        Source: Frank Russell Co.

In 1999, riding the dot-com euphoria, growth stocks outpaced value by 27.2%, as measured by the Russell 3000 growth and value indexes. However, the year 2000 brought smiles back to the faces of Warren Buffett and the value brethren, when value beat growth by 30.4% amidst the great tech sell-off.

Thus far in 2001, it's become increasingly difficult to tell value and growth apart. In the first quarter, value came out on top by 15%. In the second quarter, growth was the victor, but by a slim margin of less than 3%.