Vanguard vs. Mutual Shares, Who is the Long Term Champ

·32 min·2 clips

A small fund with high fees beat the S&P 500 for 50 years—discover how Mutual Shares outperformed Vanguard.

The host, Paul Merriman, shares updates on his financial education outreach before analyzing long-term mutual fund performance. He is preparing to speak at Western Washington University and highlights a free online course by UK educators Alan and Katie Donegan. Merriman then focuses on a historical comparison between the Vanguard S&P 500 fund and the Franklin Mutual Shares fund. He examines their performance starting from 1976 using Morningstar's chart function. A $10,000 investment in the Vanguard S&P 500 fund grew to approximately $1,886,231 by May 2025. Over the same period, the same investment in Franklin Mutual Shares grew to about $1,973,484, slightly outperforming the index. Merriman notes the Mutual Shares fund has only $6 billion in assets despite this record, attributing its small size to its sales load and 1% expense ratio. He points out that for much of the 50-year period, Mutual Shares' returns were double or more than the S&P 500's. The recent outperformance of the S&P 500 is linked to a major run in a handful of technology companies. Merriman extends the analysis to Dimensional Fund Advisors (DFA) and Avantis funds, comparing them to these benchmarks. From 1993 to 2025, a DFA U.S. Large Cap Value fund grew a $10,000 investment to $188,150, outperforming Mutual Shares' $123,456 over that same timeframe. The DFA Small Cap Value fund showed even stronger results, turning $10,000 into $268,903 from 1993 to 2025. A comparison from 2021 onward shows Avantis large cap value up 39.7%, DFA's equivalent up 43%, and Vanguard's large cap value up 36.3%, while Mutual Shares gained 22.7%. Merriman observes that DFA strategies in value have produced fine returns over the last 15 years, though with periods of underperformance. He notes that small cap value is more volatile than large cap but has historically provided higher returns. The host reveals he worked with DFA as an advisor from 1994 to 2012 and still holds their funds, along with Avantis funds, in his personal portfolio. He emphasizes that comparing different small-cap value indexes can reveal annual performance differences of about 4% between the best and worst. Merriman concludes that understanding these long-term charts helps investors maintain perspective during periods of underperformance. The episode's tone is educational and conversational, blending personal anecdote with detailed fund analysis. Listeners interested in historical fund performance, value investing, and comparative portfolio analysis will appreciate this episode. Those seeking quick tips or current market news might find the deep historical dive less immediately relevant.

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