VFIAX vs. VLCAX

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Illegal Carrot
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VFIAX vs. VLCAX

Post by Illegal Carrot »

Hello thread, I have a question about which large-cap fund to hold in my taxable account, specifically between VFIAX and VLCAX. My Roth IRA is composed of VTSAX/VTIAX for maximum equity diversity. Now I'm looking for a Vanguard non-VTSAX US large-cap fund for all the rest of the money in my taxable account. Non-VTSAX so as to avoid any possibility of a sale in my taxable account affecting my Roth holdings. It seems my options are VFIAX and VLCAX.

At first VFIAX, the S&P 500 fund, seems like the obvious option. But then I noticed VLCAX and began to compare the two. While not too significantly different, VLCAX does seem to be the better option, but is also a much less popular fund. Primarily, VFIAX has 509 total holdings, while VLCAX has 580 total equity holdings. Meaning that VLCAX is diversified across ~14% more holdings. Both funds pay out >95% QDI, but VLCAX is more diversified and has a few more non-QDI holdings that still get treated as QDI due to the 95% rule. 'Past performance is no guarantee', etc., but VLCAX has also outperformed both VFIAX and VTSAX on the 3-, 5-, and 10-year benchmarks. VTSAX outperformed it over the 1-year, but it still beat VFIAX in the same period.

Potential downsides are a slightly (+0.01%) higher ER and smaller total net assets (1/20th of VFIAX, and even less compared to VTSAX).

Could these small differences make a difference over the lifetime of the investment. Does VFIAX or VLCAX have a particular advantage?
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retired@50
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Re: VFIAX vs. VLCAX

Post by retired@50 »

Illegal Carrot wrote: Thu May 13, 2021 9:39 pm Could these small differences make a difference over the lifetime of the investment.
Probably not much.
I think most people in the forum use them as TLH partners, I'd be equally happy to hold either one.

Regards,
This is one person's opinion. Nothing more.
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Metsfan91
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Re: VFIAX vs. VLCAX

Post by Metsfan91 »

Illegal Carrot wrote: Thu May 13, 2021 9:39 pm Hello thread, I have a question about which large-cap fund to hold in my taxable account, specifically between VFIAX and VLCAX. My Roth IRA is composed of VTSAX/VTIAX for maximum equity diversity. Now I'm looking for a Vanguard non-VTSAX US large-cap fund for all the rest of the money in my taxable account. Non-VTSAX so as to avoid any possibility of a sale in my taxable account affecting my Roth holdings. It seems my options are VFIAX and VLCAX.

At first VFIAX, the S&P 500 fund, seems like the obvious option. But then I noticed VLCAX and began to compare the two. While not too significantly different, VLCAX does seem to be the better option, but is also a much less popular fund. Primarily, VFIAX has 509 total holdings, while VLCAX has 580 total equity holdings. Meaning that VLCAX is diversified across ~14% more holdings. Both funds pay out >95% QDI, but VLCAX is more diversified and has a few more non-QDI holdings that still get treated as QDI due to the 95% rule. 'Past performance is no guarantee', etc., but VLCAX has also outperformed both VFIAX and VTSAX on the 3-, 5-, and 10-year benchmarks. VTSAX outperformed it over the 1-year, but it still beat VFIAX in the same period.

Potential downsides are a slightly (+0.01%) higher ER and smaller total net assets (1/20th of VFIAX, and even less compared to VTSAX).

Could these small differences make a difference over the lifetime of the investment. Does VFIAX or VLCAX have a particular advantage?
ER is negligible. In a long run, 0.01% expense won't mean much.

VLCAX is a small fund in terms of assets. Fund Manager can be choosey about investing (how much to invest where) this small amount among various companies. Perhaps, this is why this fund has performed better than VFIAX. As the fund grows, fund manager may be forced to buy more of the losers. This could result in outperformance going away. Could end up underperforming.

If I were to choose between the two, I'd be picking VFIAX - the larger fund.
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sycamore
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Re: VFIAX vs. VLCAX

Post by sycamore »

Metsfan91 wrote: Sun May 16, 2021 12:25 am ...ER is negligible. In a long run, 0.01% expense won't mean much.
Agree. You could "lose" the 0.01% depending on the day you happen to sell.
Metsfan91 wrote: Sun May 16, 2021 12:25 am VLCAX is a small fund in terms of assets. Fund Manager can be choosey about investing (how much to invest where) this small amount among various companies. Perhaps, this is why this fund has performed better than VFIAX. As the fund grows, fund manager may be forced to buy more of the losers. This could result in outperformance going away. Could end up underperforming.
Well...VLCAX is an index fund and passively managed so the manager doesn't get to be choosey. The reason VLCAX outperformed has more to do with the stocks in its index (CRSP US Large Cap Index). There were some stocks in that index that aren't in the S&P 500, and those stocks helped bring up the fund's performance. I'd guess Tesla was one of those stocks.
Illegal Carrot wrote: Thu May 13, 2021 9:39 pm VLCAX has also outperformed both VFIAX and VTSAX on the 3-, 5-, and 10-year benchmarks. VTSAX outperformed it over the 1-year, but it still beat VFIAX in the same period.
I wouldn't make too much of past performance. Mostly what I see is that VTSAX, VFIAX, and VLCAX are all very closely correlated and have very similar performance over time. Another option is Vanguard's Mega Cap Index ETF MGC that has an even higher-cap and fewer stocks than VFIAX, but its performance is about the same as the others.
Illegal Carrot wrote: Thu May 13, 2021 9:39 pm ...Does VFIAX or VLCAX have a particular advantage?
Some people like the S&P 500 because the committee uses a "quality" screen to limit when companies can be added to the index.

I think any advantage of either would be very small. Any of them will the role of "large cap" fund.
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Re: VFIAX vs. VLCAX

Post by livesoft »

I picked VLCAX when I tax loss harvested VTSAX in 2009. I still own all those shares of VLCAX today. In reality, I don't think it matters, but a Morningstar "growth-of" chart says I made the right decision.
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Triple digit golfer
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Re: VFIAX vs. VLCAX

Post by Triple digit golfer »

I think VLCAX is more like VTSAX, but in reality it shouldn't matter much.
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anon_investor
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Re: VFIAX vs. VLCAX

Post by anon_investor »

Triple digit golfer wrote: Sun May 16, 2021 8:14 am I think VLCAX is more like VTSAX, but in reality it shouldn't matter much.
VLCAX only has 580+ stocks, so it is closer to VFIAX (500+ stocks) than to VFIAX (3700+stocks). But long term all 3 will have very similar performance since 80%+ of their holdings are identical. I have used all 3 as tax loss harvesting partners.
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Re: VFIAX vs. VLCAX

Post by Triple digit golfer »

anon_investor wrote: Sun May 16, 2021 8:32 am
Triple digit golfer wrote: Sun May 16, 2021 8:14 am I think VLCAX is more like VTSAX, but in reality it shouldn't matter much.
VLCAX only has 580+ stocks, so it is closer to VFIAX (500+ stocks) than to VFIAX (3700+stocks). But long term all 3 will have very similar performance since 80%+ of their holdings are identical. I have used all 3 as tax loss harvesting partners.
I know, I'm saying that VLCAX is more like VTSAX than VFIAX is.

But yes, VLCAX is still much closer to VFIAX than it is VTSAX.

I've also used all 3 as tax loss harvesting partners. Currently I'm holding a very large chunk of VFIAX that I bought in March 2020, and absent a very large crash, will hold it forever or until I need it for living expenses.
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Re: VFIAX vs. VLCAX

Post by anon_investor »

Triple digit golfer wrote: Sun May 16, 2021 8:38 am
anon_investor wrote: Sun May 16, 2021 8:32 am
Triple digit golfer wrote: Sun May 16, 2021 8:14 am I think VLCAX is more like VTSAX, but in reality it shouldn't matter much.
VLCAX only has 580+ stocks, so it is closer to VFIAX (500+ stocks) than to VFIAX (3700+stocks). But long term all 3 will have very similar performance since 80%+ of their holdings are identical. I have used all 3 as tax loss harvesting partners.
I know, I'm saying that VLCAX is more like VTSAX than VFIAX is.

But yes, VLCAX is still much closer to VFIAX than it is VTSAX.

I've also used all 3 as tax loss harvesting partners. Currently I'm holding a very large chunk of VFIAX that I bought in March 2020, and absent a very large crash, will hold it forever or until I need it for living expenses.
:sharebeer I tax loss harvested quite a bit in March 2020 too. Do you reinvest the VFIAX dividends or divert them to VTSAX?
Triple digit golfer
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Re: VFIAX vs. VLCAX

Post by Triple digit golfer »

anon_investor wrote: Sun May 16, 2021 8:56 am
Triple digit golfer wrote: Sun May 16, 2021 8:38 am
anon_investor wrote: Sun May 16, 2021 8:32 am
Triple digit golfer wrote: Sun May 16, 2021 8:14 am I think VLCAX is more like VTSAX, but in reality it shouldn't matter much.
VLCAX only has 580+ stocks, so it is closer to VFIAX (500+ stocks) than to VFIAX (3700+stocks). But long term all 3 will have very similar performance since 80%+ of their holdings are identical. I have used all 3 as tax loss harvesting partners.
I know, I'm saying that VLCAX is more like VTSAX than VFIAX is.

But yes, VLCAX is still much closer to VFIAX than it is VTSAX.

I've also used all 3 as tax loss harvesting partners. Currently I'm holding a very large chunk of VFIAX that I bought in March 2020, and absent a very large crash, will hold it forever or until I need it for living expenses.
:sharebeer I tax loss harvested quite a bit in March 2020 too. Do you reinvest the VFIAX dividends or divert them to VTSAX?
I either reinvest or invest them in VFWAX (international - let's not start that whole can of worms!) depending on what's low. So usually VFWAX.

I use the S&P 500 in my 401k so I really consider it the equivalent of Total Stock.
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Re: VFIAX vs. VLCAX

Post by Normchad »

Intellectually, I prefer VFIAX.

But as a practical matter, I’ve got large chunks of each in my taxable account. I use them as Tax Loss Harvesting partners.

If it wasn’t for that, I’d just use VFIAX.
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anon_investor
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Re: VFIAX vs. VLCAX

Post by anon_investor »

Triple digit golfer wrote: Sun May 16, 2021 9:10 am
anon_investor wrote: Sun May 16, 2021 8:56 am
Triple digit golfer wrote: Sun May 16, 2021 8:38 am
anon_investor wrote: Sun May 16, 2021 8:32 am
Triple digit golfer wrote: Sun May 16, 2021 8:14 am I think VLCAX is more like VTSAX, but in reality it shouldn't matter much.
VLCAX only has 580+ stocks, so it is closer to VFIAX (500+ stocks) than to VFIAX (3700+stocks). But long term all 3 will have very similar performance since 80%+ of their holdings are identical. I have used all 3 as tax loss harvesting partners.
I know, I'm saying that VLCAX is more like VTSAX than VFIAX is.

But yes, VLCAX is still much closer to VFIAX than it is VTSAX.

I've also used all 3 as tax loss harvesting partners. Currently I'm holding a very large chunk of VFIAX that I bought in March 2020, and absent a very large crash, will hold it forever or until I need it for living expenses.
:sharebeer I tax loss harvested quite a bit in March 2020 too. Do you reinvest the VFIAX dividends or divert them to VTSAX?
I either reinvest or invest them in VFWAX (international - let's not start that whole can of worms!) depending on what's low. So usually VFWAX.

I use the S&P 500 in my 401k so I really consider it the equivalent of Total Stock.
Haha, no more cans of EFs and int'l. Not automatically reinvesting dividends into the tax loss harvest partner probably makes the most sense. Any reason you use VFWAX over VTIAX? That seems weird to use a smaller haystack... :twisted:
Triple digit golfer
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Re: VFIAX vs. VLCAX

Post by Triple digit golfer »

anon_investor wrote: Sun May 16, 2021 9:55 am
Triple digit golfer wrote: Sun May 16, 2021 9:10 am
anon_investor wrote: Sun May 16, 2021 8:56 am
Triple digit golfer wrote: Sun May 16, 2021 8:38 am
anon_investor wrote: Sun May 16, 2021 8:32 am

VLCAX only has 580+ stocks, so it is closer to VFIAX (500+ stocks) than to VFIAX (3700+stocks). But long term all 3 will have very similar performance since 80%+ of their holdings are identical. I have used all 3 as tax loss harvesting partners.
I know, I'm saying that VLCAX is more like VTSAX than VFIAX is.

But yes, VLCAX is still much closer to VFIAX than it is VTSAX.

I've also used all 3 as tax loss harvesting partners. Currently I'm holding a very large chunk of VFIAX that I bought in March 2020, and absent a very large crash, will hold it forever or until I need it for living expenses.
:sharebeer I tax loss harvested quite a bit in March 2020 too. Do you reinvest the VFIAX dividends or divert them to VTSAX?
I either reinvest or invest them in VFWAX (international - let's not start that whole can of worms!) depending on what's low. So usually VFWAX.

I use the S&P 500 in my 401k so I really consider it the equivalent of Total Stock.
Haha, no more cans of EFs and int'l. Not automatically reinvesting dividends into the tax loss harvest partner probably makes the most sense. Any reason you use VFWAX over VTIAX? That seems weird to use a smaller haystack... :twisted:
We hold VTIAX in IRAs. If a TLH opportunity presents itself, I will move to VTIAX in taxable and maybe move IRAs to VFWAX. Honestly, I haven't thought much about the mechanics.
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anon_investor
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Re: VFIAX vs. VLCAX

Post by anon_investor »

Triple digit golfer wrote: Sun May 16, 2021 10:04 am
anon_investor wrote: Sun May 16, 2021 9:55 am
Triple digit golfer wrote: Sun May 16, 2021 9:10 am
anon_investor wrote: Sun May 16, 2021 8:56 am
Triple digit golfer wrote: Sun May 16, 2021 8:38 am

I know, I'm saying that VLCAX is more like VTSAX than VFIAX is.

But yes, VLCAX is still much closer to VFIAX than it is VTSAX.

I've also used all 3 as tax loss harvesting partners. Currently I'm holding a very large chunk of VFIAX that I bought in March 2020, and absent a very large crash, will hold it forever or until I need it for living expenses.
:sharebeer I tax loss harvested quite a bit in March 2020 too. Do you reinvest the VFIAX dividends or divert them to VTSAX?
I either reinvest or invest them in VFWAX (international - let's not start that whole can of worms!) depending on what's low. So usually VFWAX.

I use the S&P 500 in my 401k so I really consider it the equivalent of Total Stock.
Haha, no more cans of EFs and int'l. Not automatically reinvesting dividends into the tax loss harvest partner probably makes the most sense. Any reason you use VFWAX over VTIAX? That seems weird to use a smaller haystack... :twisted:
We hold VTIAX in IRAs. If a TLH opportunity presents itself, I will move to VTIAX in taxable and maybe move IRAs to VFWAX. Honestly, I haven't thought much about the mechanics.
Wouldn't that create a wash sale? Why not just hold VT/VTWAX in IRAs (since you use the global haystack)?
Triple digit golfer
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Re: VFIAX vs. VLCAX

Post by Triple digit golfer »

anon_investor wrote: Sun May 16, 2021 10:08 am
Triple digit golfer wrote: Sun May 16, 2021 10:04 am
anon_investor wrote: Sun May 16, 2021 9:55 am
Triple digit golfer wrote: Sun May 16, 2021 9:10 am
anon_investor wrote: Sun May 16, 2021 8:56 am

:sharebeer I tax loss harvested quite a bit in March 2020 too. Do you reinvest the VFIAX dividends or divert them to VTSAX?
I either reinvest or invest them in VFWAX (international - let's not start that whole can of worms!) depending on what's low. So usually VFWAX.

I use the S&P 500 in my 401k so I really consider it the equivalent of Total Stock.
Haha, no more cans of EFs and int'l. Not automatically reinvesting dividends into the tax loss harvest partner probably makes the most sense. Any reason you use VFWAX over VTIAX? That seems weird to use a smaller haystack... :twisted:
We hold VTIAX in IRAs. If a TLH opportunity presents itself, I will move to VTIAX in taxable and maybe move IRAs to VFWAX. Honestly, I haven't thought much about the mechanics.
Wouldn't that create a wash sale? Why not just hold VT/VTWAX in IRAs (since you use the global haystack)?
You're right, moving to VFWAX in the IRAs would. I guess I'd wait 31 days to do it, then I'll be set up again for the next TLH opportunity.

I don't use Total World in IRAs because I'm U.S. heavy in taxable. I also have a 401k with just the S&P 500. Using Total World in IRAs would create a U.S. tilt. I'm fine with a small tilt (shh), but it would change regularly with contributions. Seems arbitrary and I don't want to do it just for simplicity.
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Re: VFIAX vs. VLCAX

Post by ruralavalon »

Illegal Carrot wrote: Thu May 13, 2021 9:39 pm Hello thread, I have a question about which large-cap fund to hold in my taxable account, specifically between VFIAX and VLCAX. My Roth IRA is composed of VTSAX/VTIAX for maximum equity diversity. Now I'm looking for a Vanguard non-VTSAX US large-cap fund for all the rest of the money in my taxable account. Non-VTSAX so as to avoid any possibility of a sale in my taxable account affecting my Roth holdings. It seems my options are VFIAX and VLCAX.

At first VFIAX, the S&P 500 fund, seems like the obvious option. But then I noticed VLCAX and began to compare the two. While not too significantly different, VLCAX does seem to be the better option, but is also a much less popular fund. Primarily, VFIAX has 509 total holdings, while VLCAX has 580 total equity holdings. Meaning that VLCAX is diversified across ~14% more holdings. Both funds pay out >95% QDI, but VLCAX is more diversified and has a few more non-QDI holdings that still get treated as QDI due to the 95% rule. 'Past performance is no guarantee', etc., but VLCAX has also outperformed both VFIAX and VTSAX on the 3-, 5-, and 10-year benchmarks. VTSAX outperformed it over the 1-year, but it still beat VFIAX in the same period.

Potential downsides are a slightly (+0.01%) higher ER and smaller total net assets (1/20th of VFIAX, and even less compared to VTSAX).

Could these small differences make a difference over the lifetime of the investment. Does VFIAX or VLCAX have a particular advantage?
Vanguard 500 Index Fund (VFIAX) and Vanguard Large-Cap Index Fund (VLCAX) have had very similar performance. Portfolio Visualizer, 2005-2021. In my opinion it is unlikely to make a difference over a lifetime of investing.

Haha, no more cans of EFs and int'l. Not automatically reinvesting dividends into the tax loss harvest partner probably makes the most sense. Any reason you use VFWAX over VTIAX? That seems weird to use a smaller haystack... :twisted:
Likewise Vanguard Total International Stock Index Fund (VTIAX) and Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX) have had almost identical performance. Portfolio Visualizer, 2013-2021. Each fund covers both developed and emerging markets.The difference is that VFWAX omits stocks of international small-cap companies, an immaterial omission in my opinion.
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