Replicating TSM??

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Replicating TSM??

Postby fcox85 » Sun Dec 09, 2012 5:48 pm

My 401(k) recently added some Vanguard Signal class funds, but for whatever reason, failed to add TSM signal. If I'm looking to replicate TSM for a certain portion of my portfolio, will the following funds allow me to do so, and if so, what weight should I give each:

SP 500 Indx Signal
Small Cap Indx Signal
Mid Cap Indx Signal

Thanks.
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Re: Replicating TSM??

Postby LadyGeek » Sun Dec 09, 2012 5:51 pm

Welcome! The wiki can help: Approximating Total Stock Market

The important part is knowing to scroll down to the bottom of the page and use the Morningstar Instant X-Ray tool.
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Re: Replicating TSM??

Postby retiredjg » Sun Dec 09, 2012 5:52 pm

You've got nice choices. This Wiki page will tell you how.

Wiki article link: Approximating Total Stock Market
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Re: Replicating TSM??

Postby stan1 » Sun Dec 09, 2012 6:05 pm

Personally I would just do 80% S&P 500 Index and 20% Small Cap Index.

The world will not end if you exclude the Mid Cap Index or if you are off by a few percent (the ratio changes over time).

Some may want to be precise down to the last 0.01%, but I don't think that's necessary.
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Re: Replicating TSM??

Postby chaz » Sun Dec 09, 2012 6:10 pm

Ask your HR person to add TSM signal. Might happen.
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Re: Replicating TSM??

Postby LadyGeek » Sun Dec 09, 2012 6:26 pm

stan1 wrote:Some may want to be precise down to the last 0.01%, but I don't think that's necessary.

To the nearest 5% is all you need. Anything more precise won't make much difference and will drive you crazy tracking it.
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Re: Replicating TSM??

Postby fcox85 » Sun Dec 09, 2012 7:25 pm

Thanks for all the replies. Sorry that I missed the Wiki and unnecessarily started this thread. Apparently my chosen search terms were not adequate. In the future I'll make sure I do a better job of searching there first.
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Re: Replicating TSM??

Postby retiredjg » Sun Dec 09, 2012 8:05 pm

Not to worry. There are some things that are hard to fund unless you already know the page exists. :happy
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Re: Replicating TSM??

Postby nisiprius » Sun Dec 09, 2012 8:59 pm

Do you have the Extended Market Index Fund? If so, see the Wiki article

http://www.bogleheads.org/wiki/Extended ... Index_Fund

This fund does the specific job of completing the S&P 500 index to form a Total Market index. (It does happen to be the S&P Total Stock Market Index, which is not strictly identical to the one VTSMX uses).
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Re: Replicating TSM??

Postby LadyGeek » Sun Dec 09, 2012 9:54 pm

fcox85 wrote:Thanks for all the replies. Sorry that I missed the Wiki and unnecessarily started this thread. Apparently my chosen search terms were not adequate. In the future I'll make sure I do a better job of searching there first.

No worries; we'll keep discussing it for a while, anyway. :)

The wiki's search box (upper right corner of the wiki page) isn't as good as Google. In the upper right corner of the forum, click on Advanced site search and enter the search terms in "Search Wiki Only" - or search both the forum and the wiki.

chaz wrote:Ask your HR person to add TSM signal. Might happen.

Chaz is referring to Vanguard's Signal® share class; lower cost funds intended for institutional clients (meaning more volume = lower costs). Vanguard share classes
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Re: Replicating TSM??

Postby fcox85 » Mon Dec 10, 2012 11:45 am

No Extended Market fund offered in our plan. I can't really complain, as we have a great list of funds, which are comprised mainly of Vanguard's TR funds, in addition to what they've just added. It does seem a little odd that they chose to arrange the choices that way, but oh well.
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Re: Replicating TSM??

Postby Joe S. » Mon Dec 10, 2012 1:59 pm

You can't perfectly replicate the TSM. The S&P 500 is roughly the 500 largest stocks numbers 1-500. The midcap fund is based on the MSCI mid cap index which is stocks 301-750 in market cap. The small cap fund is based on the MSCI small cap index which is stocks 751-2500 in market cap. Meanwhile the TSM represents approximately stocks 1-3241. However the approximation given on the Boglehead site is close enough.


http://www.msci.com/products/indices/co ... ndices/us/
https://personal.vanguard.com/us/funds/ ... =INT#tab=2

Edit: the word roughly added.
Last edited by Joe S. on Mon Dec 10, 2012 3:50 pm, edited 2 times in total.
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Re: Replicating TSM??

Postby Joe S. » Mon Dec 10, 2012 2:00 pm

fcox85 wrote:Thanks for all the replies. Sorry that I missed the Wiki and unnecessarily started this thread. Apparently my chosen search terms were not adequate. In the future I'll make sure I do a better job of searching there first.


We can't expect you to read everything in the Wiki before asking questions. Sometimes it is easy to ask than to search.
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Re: Replicating TSM??

Postby Default User BR » Mon Dec 10, 2012 2:34 pm

Joe S. wrote:The S&P 500 is the 500 largest stocks numbers 1-500.

That's not true. The S&P 500 is a custom index devised by a committee to attempt to represent the large-cap market.


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Re: Replicating TSM??

Postby Ryan_in_Chi » Mon Dec 10, 2012 3:49 pm

fcox85 wrote:No Extended Market fund offered in our plan. I can't really complain, as we have a great list of funds, which are comprised mainly of Vanguard's TR funds, in addition to what they've just added. It does seem a little odd that they chose to arrange the choices that way, but oh well.


My company 401k is administered by Vanguard, but our fund choices sound similar to yours. No TSM. Odd...
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Re: Replicating TSM??

Postby Joe S. » Mon Dec 10, 2012 3:53 pm

Default User BR wrote:
Joe S. wrote:The S&P 500 is the 500 largest stocks numbers 1-500.

That's not true. The S&P 500 is a custom index devised by a committee to attempt to represent the large-cap market.


Brian


I edited my comments to say "roughly." The rules for the S&P 500 are complex.
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Re: Replicating TSM??

Postby fcox85 » Mon Dec 10, 2012 5:31 pm

Ryan_in_Chi wrote:
fcox85 wrote:No Extended Market fund offered in our plan. I can't really complain, as we have a great list of funds, which are comprised mainly of Vanguard's TR funds, in addition to what they've just added. It does seem a little odd that they chose to arrange the choices that way, but oh well.


My company 401k is administered by Vanguard, but our fund choices sound similar to yours. No TSM. Odd...


Ours is actually administered through Regions OnePlanPlus program. Not a lot of information on the web about them, but I do know that when Regions recently sold its investment business to Morgan Keegan, our plan stayed with Regions. We have a fair amount of other funds from a variety of providers, but I ignore them completely. The other funds' expense ratios seem to hover around .65 - 1.0% compared to a max of .19% for the VG Funds.

I consider myself extremely lucky that my employer offers a lot of VG options. Admittedly, when I made my first election for our 401(k) last year, I hadn't stumbled on this forum yet, and simply picked a fund that sounded sensible to me at the time (TR Fund), with no real regard to ER, or the underlying holdings. It just so happens that the name that jumped out at me was "Target Retirement," and that it was a low-expense, well-diversified VG fund. I feel that I really dodged a bullet there, and could have otherwise found myself in a lot of trouble due to my own ignorance.
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Re: Replicating TSM??

Postby LadyGeek » Mon Dec 10, 2012 5:44 pm

Joe S. wrote:
Default User BR wrote:
Joe S. wrote:The S&P 500 is the 500 largest stocks numbers 1-500.

That's not true. The S&P 500 is a custom index devised by a committee to attempt to represent the large-cap market.
Brian

I edited my comments to say "roughly." The rules for the S&P 500 are complex.

Let's go right to the source: S&P 500 Index - S&P Dow Jones Indices For an overview, download the fact sheet. The gory details are in the methodology.

The wiki has a good overview; indexes are indeed complex: Stock Market Indexing - Bogleheads

Pop quiz (advanced topic): Understand the difference between a Price Return and a Total Return index.
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Re: Replicating TSM??

Postby zaboomafoozarg » Tue Dec 11, 2012 12:45 am

LadyGeek wrote:
stan1 wrote:Some may want to be precise down to the last 0.01%, but I don't think that's necessary.

To the nearest 5% is all you need. Anything more precise won't make much difference and will drive you crazy tracking it.


Hey, I like tracking to the nearest .01%! :D
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