VTI or VIG as a core U.S Stock Market Holding
VTI or VIG as a core U.S Stock Market Holding
Which ETF is better suited to function as a core U.S Stock market/ Large Blend Fund in a portfolio?
I know that Vanguard's Total U.S Stock Market ETF, VTI has more returns, yet the Divdend appreciation fund is less volatile then VTI. Or, is it best just to not be concerned with a volatile equity fund as long as it's offset by bond funds?
I know that Vanguard's Total U.S Stock Market ETF, VTI has more returns, yet the Divdend appreciation fund is less volatile then VTI. Or, is it best just to not be concerned with a volatile equity fund as long as it's offset by bond funds?
- InvestorNewb
- Posts: 1663
- Joined: Mon Sep 03, 2012 11:27 am
Re: VTI or VIG as a core U.S Stock Market Holding
VTI is the favorite around here - not to mention all of Vanguard's Target Retirement funds use it too.
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
-
- Posts: 1223
- Joined: Tue Jun 19, 2007 4:46 pm
Re: VTI or VIG as a core U.S Stock Market Holding
I perfer TSM though my portfolio has a value and a small tilt.
-
- Posts: 7502
- Joined: Mon Dec 17, 2007 6:32 pm
Re: VTI or VIG as a core U.S Stock Market Holding
I am slice and dice guy, and I actually hold "purer" large-blend funds. I have some MGC and IVV. There's nothing wrong with VTI. I don't use dividend funds, although I do have a US Large Value holding in VTV.
Brian
Brian
Re: VTI or VIG as a core U.S Stock Market Holding
Your actual question, if translated properly, is should I hold a total market fund, or a large blend fund. The former being VTI and the latter VIG. I would say VTI because of lower costs, and greater exposure to more risky (e.g. volatile) asset classes that over time have returned more. VIG is a good fund, but look at what it is composed of, i.e. large capitalization, dividend paying companies. As soon as you have bought it, you then say, gosh I should get some small stocks to add diversity to the fact I just bought a large blend fund. As soon as you do this you go out and get a small cap fund. The result is you have a portfolio that resembles VTI at a much higher cost. Here is some information I think you need to understand. By market cap large blend is about 70% of the whole market. Mid caps is about 20% and small caps is about 10%. Most Bogleheads buy the whole market and then tilt a bit. If you got VTI and then bought VBR in the amount of 10% of what you have in VTI, then you would have tilt to small value in the amount of 100%. That is moderately aggressive. If you bought VBR in an amount equal to 50% of VTI would be really aggressive. Decide where you should be. The one way to guarantee you will lose money is to be too aggressive, and sell out at a low and miss a recovery. Dave
Re: VTI or VIG as a core U.S Stock Market Holding
I see, so it's smarter to have the entire market covered then to tilt. This didn't occur to me before.Occupier wrote:Your actual question, if translated properly, is should I hold a total market fund, or a large blend fund. The former being VTI and the latter VIG. I would say VTI because of lower costs, and greater exposure to more risky (e.g. volatile) asset classes that over time have returned more. VIG is a good fund, but look at what it is composed of, i.e. large capitalization, dividend paying companies. As soon as you have bought it, you then say, gosh I should get some small stocks to add diversity to the fact I just bought a large blend fund. As soon as you do this you go out and get a small cap fund. The result is you have a portfolio that resembles VTI at a much higher cost. Here is some information I think you need to understand. By market cap large blend is about 70% of the whole market. Mid caps is about 20% and small caps is about 10%. Most Bogleheads buy the whole market and then tilt a bit. If you got VTI and then bought VBR in the amount of 10% of what you have in VTI, then you would have tilt to small value in the amount of 100%. That is moderately aggressive. If you bought VBR in an amount equal to 50% of VTI would be really aggressive. Decide where you should be. The one way to guarantee you will lose money is to be too aggressive, and sell out at a low and miss a recovery. Dave
Re: VTI or VIG as a core U.S Stock Market Holding
I am not against tilting, but you start with the total market and then tilt, not starting with just a section of the market e.g. large blend, and then maybe tilt. Dave
Re: VTI or VIG as a core U.S Stock Market Holding
Adding say small value to total market is one way to do it. But starting with large blend and adding small value is also a tilt towards small value and away from small growth (aka the "black hole of investing".)Occupier wrote:I am not against tilting, but you start with the total market and then tilt, not starting with just a section of the market e.g. large blend, and then maybe tilt. Dave
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Small-Cap Growth vs. Small-Cap Value
The "black hole of investing" has done quite well. These are annualized returns for Vanguard Small-Cap Growth (VISGX) and Vanguard Small-Cap Value (VISVX) funds:Adding small value is also a tilt towards small value and away from small growth (aka the "black hole of investing".)
FUND----5-years----10-years----15-years
VISGX-----8.73%-----11.14%------8.62%
VISVX-----8.23%-----10.16%------8.27%
Past performance does not guarantee future performance.
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: VTI or VIG as a core U.S Stock Market Holding
This method is especially useful with Vanguard funds, since Vanguard's SCV fund actually has quite a bit of mid cap. TSM + SCV overweights mid cap which may not be what you want. If you do want a factor tilt, this large blend + small value method sounds like a very effective and simple way to do it.Doc wrote:Adding say small value to total market is one way to do it. But starting with large blend and adding small value is also a tilt towards small value and away from small growth (aka the "black hole of investing".)Occupier wrote:I am not against tilting, but you start with the total market and then tilt, not starting with just a section of the market e.g. large blend, and then maybe tilt. Dave
If you buy into the small value premium, it only makes sense to underweight small growth, since the Fama/French model illustrates both. I am convinced there is a small value premium but as Taylor shows it can take a long, long time to show up. If I tilt small value and underperform the market for fifteen years I will be very unhappy and regret my choice. For this reason I hold market weight and do not tilt.
Re: Small-Cap Growth vs. Small-Cap Value
Taylor Larimore wrote:The "black hole of investing" has done quite well. These are annualized returns for Vanguard Small-Cap Growth (VISGX) and Vanguard Small-Cap Value (VISVX) funds:Adding small value is also a tilt towards small value and away from small growth (aka the "black hole of investing".)
FUND----5-years----10-years----15-years
VISGX-----8.73%-----11.14%------8.62%
VISVX-----8.23%-----10.16%------8.27%
Past performance does not guarantee future performance.
Best wishes
Taylor
http://www.thebamalliance.com/BAMNewsMa ... sting.aspxAvoid the Black Hole of Investing – Larry Swedroe
Small-cap growth stocks have been euphemistically called "the black hole of investing." The reason is that they have produced the lowest returns of any of the major U.S. stock asset classes, even though they theoretically should perform much better. The following table shows both the annualized returns and the annual standard deviations for the period 1927-2011.*
Small growth has done very well the last ten years. Prior to that - not so much.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Growth; Value; and Total Stock Market
Mr. Bogle has examined the long-term returns of growth and value stocks and explains why he prefers a total market index fund. Bogleheads can read about it in this 2002 Keynote speech he gave at the Morningstar Investment Conference in Chicago (I heard him give it).
The Telltale Chart
Best wishes.
Taylor
The Telltale Chart
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
-
- Posts: 7502
- Joined: Mon Dec 17, 2007 6:32 pm
Re: VTI or VIG as a core U.S Stock Market Holding
Perhaps you do, but I don't. I use a slice-and-dice approach, so I have an allocation for large-blend, which is filled with large-cap funds.Occupier wrote:I am not against tilting, but you start with the total market and then tilt, not starting with just a section of the market e.g. large blend, and then maybe tilt. Dave
Brian
-
- Posts: 7502
- Joined: Mon Dec 17, 2007 6:32 pm
Re: Growth; Value; and Total Stock Market
Or you can read the work of Professors Fama and French and see why many of us prefer tilts to small and value.Taylor Larimore wrote:Mr. Bogle has examined the long-term returns of growth and value stocks and explains why he prefers a total market index fund. Bogleheads can read about it in this 2002 Keynote speech he gave at the Morningstar Investment Conference in Chicago (I heard him give it).
Brian
- Taylor Larimore
- Posts: 32842
- Joined: Tue Feb 27, 2007 7:09 pm
- Location: Miami FL
Re: Growth; Value; and Total Stock Market
Brian:Default User BR wrote:Or you can read the work of Professors Fama and French and see why many of us prefer tilts to small and value.Taylor Larimore wrote:Mr. Bogle has examined the long-term returns of growth and value stocks and explains why he prefers a total market index fund. Bogleheads can read about it in this 2002 Keynote speech he gave at the Morningstar Investment Conference in Chicago (I heard him give it).
Brian
In the linked speech Mr. Bogle quotes Professor Fama as saying:
There is more than one road to Dublin.Whether you decide to tilt towards value depends on whether you are willing to bear the associated risk . . . The market portfolio is always efficient. For most people, the market portfolio is the most sensible decision."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
- stevewolfe
- Posts: 1676
- Joined: Fri Oct 10, 2008 7:07 pm
Re: VTI or VIG as a core U.S Stock Market Holding
The more I read about small cap performance the more I question the data. Particularly annualized returns that go back to 1927. There were large spreads. There were very illiquid markets. Trading took, in some cases weeks or months in very small stocks many years ago. Even as recently as the 1970's and early 1980's spreads were in the single digit percentages.
I very much struggle with anyone having a small cap value or small cap growth return that is to 2 decimal places for any year prior to say 1980 or so - and that might be generous. Mike at Longtermreturns.com states it much more eloquently than I have Small cap premium or liquidity premium.
I very much struggle with anyone having a small cap value or small cap growth return that is to 2 decimal places for any year prior to say 1980 or so - and that might be generous. Mike at Longtermreturns.com states it much more eloquently than I have Small cap premium or liquidity premium.
-
- Posts: 711
- Joined: Wed Jan 24, 2018 1:24 am
Re: VTI or VIG as a core U.S Stock Market Holding
I just bought VIG and I am thinking of using it as my core fund. Although Taylor's remarks and the link to the whitecoat investor article were very persuasive,I still feel more comfortable holding a fund that screens out some of the no-dividend high flyers.
What really sealed it for me was the fact that VIG only declined 26% during the Great Recession. I know I can hold through that.
Maybe I should add that I do not have any bonds and might not ever. By avoiding the safety net of bonds I hope to achieve higher returns for my heirs.
Therefore I have to have a fund I can stick with and one whose screening process makes sense to me. If I were putting together stock by stock my own portfolio I would be choosing among Dividend Aristocrats.
This fund is pretty close to that.
What really sealed it for me was the fact that VIG only declined 26% during the Great Recession. I know I can hold through that.
Maybe I should add that I do not have any bonds and might not ever. By avoiding the safety net of bonds I hope to achieve higher returns for my heirs.
Therefore I have to have a fund I can stick with and one whose screening process makes sense to me. If I were putting together stock by stock my own portfolio I would be choosing among Dividend Aristocrats.
This fund is pretty close to that.
- peterinjapan
- Posts: 605
- Joined: Fri May 15, 2015 8:41 am
- Location: Japan!
Re: VTI or VIG as a core U.S Stock Market Holding
I like VIG, but I love DGRO, iShares version of VIG, which always seems to outperform VIG and has a higher yield to boot. So give that an eyeball before deciding. I use DGRO, IVV, IJS and IJH as my core funds, plus some individual stocks I can't seem to get away from.
-
- Posts: 711
- Joined: Wed Jan 24, 2018 1:24 am
Re: VTI or VIG as a core U.S Stock Market Holding
Thanks for sharing your portfolio. I will certainly look up DGRO. But why IVV IJS and IJH? I thought Vanguard had equivalent funds of the same type only cheaper?
Re: VTI or VIG as a core U.S Stock Market Holding
Exactly.
We use one FTSE all world equity ETF as our only equity holding. I'm thinking of tilting smaller by "slicing and dicing" in 17-33% of ONE developed world small cap ETF.
We use one FTSE all world equity ETF as our only equity holding. I'm thinking of tilting smaller by "slicing and dicing" in 17-33% of ONE developed world small cap ETF.
KISS & STC.
-
- Posts: 780
- Joined: Fri Aug 28, 2015 12:44 pm
- Location: Montana
Re: VTI or VIG as a core U.S Stock Market Holding
Carol8888,
Welcome to Bogleheads.
When I think of VIG (dividend appreciation index fund) I think of quality.
It's a excellent fund...
Welcome to Bogleheads.
When I think of VIG (dividend appreciation index fund) I think of quality.
It's a excellent fund...
Re: VTI or VIG as a core U.S Stock Market Holding
Note, this conversation is FIVE years old.
But anyway, I have a nice collection of boring investment products and I like VIG.
Your money, your portfolio, your decision.
Gracias por leer ~cfs
But anyway, I have a nice collection of boring investment products and I like VIG.
Your money, your portfolio, your decision.
Gracias por leer ~cfs
~ Member of the Active Retired Force since 2014 ~
-
- Posts: 711
- Joined: Wed Jan 24, 2018 1:24 am
Re: VTI or VIG as a core U.S Stock Market Holding
I know the logical reasons for going with VTI but I also know that in my case investing is part psychological and part rational. If I had gone with VTI I would have felt uneasy investing in it today because I know it has a lot of tech and in a draw down might go down further than VIG.
When I looked at the holdings of VIG I felt as if as I had found a perfect fit for my style of investing. I was so happy to have found something to relieve me from the pressure of picking stocks. This really simplifies my life.
When I looked at the holdings of VIG I felt as if as I had found a perfect fit for my style of investing. I was so happy to have found something to relieve me from the pressure of picking stocks. This really simplifies my life.
-
- Posts: 371
- Joined: Fri Jun 09, 2017 12:35 pm
Re: VTI or VIG as a core U.S Stock Market Holding
VIG has 29% in industrials, quite a lot http://portfolios.morningstar.com/fund/summary?t=VIGCarol88888 wrote: ↑Fri Jun 01, 2018 2:57 pm I know the logical reasons for going with VTI but I also know that in my case investing is part psychological and part rational. If I had gone with VTI I would have felt uneasy investing in it today because I know it has a lot of tech and in a draw down might go down further than VIG.
When I looked at the holdings of VIG I felt as if as I had found a perfect fit for my style of investing. I was so happy to have found something to relieve me from the pressure of picking stocks. This really simplifies my life.
It's possible that industrials might cause VIG to have a bigger drawdown than VTI in future. Tech isn't the only industry that can have big declines.
Re: VTI or VIG as a core U.S Stock Market Holding
If I was going to build a portfolio of individual stocks, the style/strategy used by VIG would probably be roughly similar to what I would use. I actually think it's a reasonable methodology that may have similarities to what has been dubbed the "Quality" factor (although I'm not sure how to run a factor regression on that 'factor'). I think it's a reasonable screen for stocks, but I also don't believe it's a screen that is likely to outperform, or sell at a discount. I would think, it's probably the most apparent and obvious screen for anyone looking at individual stocks.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Re: VTI or VIG as a core U.S Stock Market Holding
What is VIG?
-
- Posts: 711
- Joined: Wed Jan 24, 2018 1:24 am
Re: VTI or VIG as a core U.S Stock Market Holding
It is true that VIG - (dividend appreciation ETF) has a big slug of industrials. But I fear the volatility of tech more and VTI and VOO (S & P) are over 21 % tech.
I am making as assumption that the next drawndown will be similar to the last. I am also making a bet that it won't trail the S&P by much. But it does have a slightly higher ER - .08 - and 14% turnover so I guess I am going to find out if the quality factor is worth it.
I am making as assumption that the next drawndown will be similar to the last. I am also making a bet that it won't trail the S&P by much. But it does have a slightly higher ER - .08 - and 14% turnover so I guess I am going to find out if the quality factor is worth it.