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Buy, Hold, Sell – 3 Vanguard Large Growth Funds

The best growth funds handily outperform the markets. The worst are muddled by bad managment

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Vanguard Morgan Growth Fund

crazy investorHold. At what point does an active fund become an index fund?

Vanguard has managed to keep from hiring or firing anyone at Vanguard Morgan Growth Fund (VMRGX) for nearly five years, but with five different firms sub-advising Morgan Growth, what you get is a middle-of-the-road, no-conviction mid- to large-cap growth stock amalgam. With five firms stirring the pot, no one can do too much damage on their own — but they can’t really drive performance higher, either.

Though its low expenses make it an able competitor in the broad mutual fund universe, the fund has continued to lag its Russell 3000 Growth Index benchmark since the three newest managers were hired — Jennison Associates in January 2007, and Kalmar and Frontier Capital in November 2008.

The fund is neither low-risk nor high-return. During the 2007 to 2009 market tumble, it hit a new MCL of -50.3%, compared to -52.8% for Growth Index. However, during the same period Primecap’s worst drawdown was -44.3%.

Even former Vanguard chairman Jack Bogle, years ago, said that Morgan Growth is “an average fund. It’s not a star.” If I’m not buying a star, why not just buy the index, keep costs low and accept that I’ll get average performance?

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