VTI

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VTI

Postby UpstateNY86 » Thu Dec 27, 2012 3:21 pm

What are the pros and cons of owning VTI verses SPY? Aren't they essentially the same thing. I have an extra 800 dollers and want to put it into my roth and then into a nice stock tracking index.
Thank You!
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Re: VTI

Postby livesoft » Thu Dec 27, 2012 3:23 pm

They are not the same thing. Presumably you have read the prospectuses of the investments that you are thinking of buying, right?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: VTI

Postby UpstateNY86 » Thu Dec 27, 2012 3:24 pm

Was just scouring thru scottrade research..
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Re: VTI

Postby CyberBob » Thu Dec 27, 2012 3:30 pm

SPY tracks the S&P 500 index which contains, as the name suggests, 500 stocks.
VTI currently tracks the MSCI US Broad Market Index, which contains about 3,300 stocks. Basically, all of the 500 big stocks from above, plus some mid-cap stocks and lots of small-cap stocks.

Bob
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Re: VTI

Postby webslinger » Thu Dec 27, 2012 3:36 pm

Agree with the above posts.

A better Vanguard ETF comparison would be VOO which tracks the S&P500 as does SPY. VOO's ER is 3 basis points lower last I looked.
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Re: VTI

Postby NYBoglehead » Thu Dec 27, 2012 3:36 pm

I think the $800 would have a better home in an index fund over the ETF. No need to arbitrarily pick a limit price at which to purchase the shares. And you'll get the entire $800, since ETF shares can only be purchased in whole shares, which will leave some of that money in your sweep account.
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Re: VTI

Postby nisiprius » Thu Dec 27, 2012 6:14 pm

You should read the prospectus, but if you aren't going to do that, at the very least you should go to the descriptive web pages. You REALLY should take the time to do that much, really. I mean really. How much time would you spend on some other $800 purchase? I'm going to give you the links and some explanation, but PLEASE, take the time to click on them and poke around the websites a bit and get an idea of how companies go about describing their ETFs and mutual funds.

Read the descriptions for yourself. Don't let someone else (like me) do it for you. Would you let someone else test-drive a car for you, or try on shoes for you?

https://personal.vanguard.com/us/funds/ ... IntExt=INT
Image

https://www.spdrs.com/product/fund.seam?ticker=spy
Image

OK,here's the Cliff's Notes version. SPY is the biggest, oldest, and most popular ETF that tracks the S&P 500 index. There are many other ETFS and mutual funds that also track it. VOO is Vanguard's S&P 500 ETF. Schwab has an S&P 500 mutual fund, SWPPX, that you can buy with a $100 minimum purchase.

The S&P 500 is a cap-weighted index of 500 stocks, not exactly the 500 biggest, but 500 that S&P deems to be "leading companies in leading industries." For a very long time it has been taken as a proxy for "the stock market," and, by market capitalization (dollar value) it actually accounts for 80% of the stock market and actually is pretty close to the total stock market.

As interest in small companies grew, people wanted indexes that were more comprehensive than the S&P 500 and that really tried to track the total market, including the smaller companies. As electronic technology improved, it became possible to create such indexes, and then to create index funds that tracked them. One such index is the MSCI US Broad Market Index. Mutual funds and ETFs that track such indexes tend to be called "total stock market" funds. VTI is Vanguard's "total stock market" ETF.

SPY and VTI could be called fundamentally the same in the sense that they approximate the whole market and don't single out specific sectors or categories. But VTI is a closer approximation to the total market than SPY is.

Theoretically, the reason most investors would want to hold an S&P 500 fund or ETF is to hold "the stock market," and if that's the reason for wanting it, a total market fund or ETF like VTI does a better job. The S&P 500 funds and ETFs give you 80% of the market; VTI gives you 99.5%. In practice, though, the difference between the two has been amazingly small.

Any total stock market index ETF or mutual fund, or any S&P 500 ETF or mutual fund, would be a suitable "core" holding for the domestic stock portion of your portfolio, as long as the expense ratio isn't too high. But you should at least be thinking about holding international stocks and bonds as well--maybe not now, but someday.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: VTI

Postby asset_chaos » Fri Dec 28, 2012 2:34 am

UpstateNY86,

You're almost there. Look at all the investment decisions you've done right so far. You've had the discipline to save money: great, keep it up; you're ahead of the game. You've opened a Roth to put your savings into: again a smart decision. And you've figured out that the surest way to obtain the rewards of low term investment in businesses is to invest in the stock market is through a low-cost, highly diversified stock index fund; many sources can articulate the reasons for that better than I can. You're most of the way to a great savings/investment plan and eventual financial independence. Go the rest of the way and learn just enough about the particular index fund choices you face. The chief reason for this is, I believe, so that you sufficiently understand your investment and reason for making it that so that no matter when the stock market soars or stumbles, you'll be able to shrug your shoulders and stay the course.

I don't know where you are in life or what other assets you have outside the money you're putting into your Roth, but I'll go out on a limb and guess that you're somewhat early in life. In which case I'll also suggest investing in some bonds as well as the stocks. At some point in life everyone will need a significant allocation to bonds. I suggest that it's a good idea to have some bonds early in life to experience their performance over many market conditions in order to emotionally assimilate their use and misuse into one's core investing understanding. This may also aid in finally coming to understand one's own true risk tolerance. 10 or 20% at the very least, just to experience the full spectrum of investing.
Regards, | | Guy
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Re: VTI

Postby UpstateNY86 » Fri Dec 28, 2012 7:58 am

Thanks for the replies. I have done a lot of research within the last 16 hours and understand the difference. I think vti is the proper move for me. The question I ask myself is how do these other expensive mutual funds get any business? People just not caring or paying attention.
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Re: VTI

Postby STC » Fri Dec 28, 2012 8:25 am

UpstateNY86 wrote:Thanks for the replies. I have done a lot of research within the last 16 hours and understand the difference. I think vti is the proper move for me. The question I ask myself is how do these other expensive mutual funds get any business? People just not caring or paying attention.



Marketing dollars spent to exploit the human emotions of fear and greed. It really is that simple.
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Re: VTI

Postby UpstateNY86 » Fri Dec 28, 2012 8:47 am

I know I want to help my uncles with this advice but do not want to look like I am prying. I know they both have at least 300k in funds. What a shame.
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Re: VTI

Postby john94549 » Fri Dec 28, 2012 9:43 am

UpstateNY86 wrote:I know I want to help my uncles with this advice but do not want to look like I am prying. I know they both have at least 300k in funds. What a shame.


There are quite a few books recommending low-cost index funds and ETFs (many you can no doubt find referenced in the Boglehead Wiki). Perhaps you might find one, peruse it, then pass it along to your uncles.
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Re: VTI

Postby BL » Fri Dec 28, 2012 10:06 am

UpstateNY86 wrote:I know I want to help my uncles with this advice but do not want to look like I am prying. I know they both have at least 300k in funds. What a shame.


It is difficult to advise others unless they ask you for advice, but perhaps you could give them a book something like the "Bogleheads Guide" to investing or the one on retirement. That is as far as I would go. Each one must decide on their own.
By the way, Vanguard has lots of low-cost mutual funds, and with $10,000 many cost the same as ETFs and I prefer them.
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Re: VTI

Postby fickle » Fri Dec 28, 2012 12:23 pm

STC wrote:

Marketing dollars spent to exploit the human emotions of fear and greed. It really is that simple.


And ignorance and peer pressure. There are plenty of people who fall like 9 pins when given a forceful "pitch". Especially when the pitch is from the grandson of your parent's best friends for 60+ years, and you live in a tight community where you buy CutCo knives and Avon products to "help so and so's newly graduated kid get a start in life." If you don't buy, it's gossip, gossip, gossip.

I married into that, and if I hadn't, I would have never dreamed such situations existed. I particularly *love* it when the product being touted is from some respected mucky-muck at your church. Not.
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