Which Index Fund to choose?

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BrianJone
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Which Index Fund to choose?

Post by BrianJone » Tue Apr 09, 2013 9:05 pm

I found 3 index funds, they all look to be very similar and almost the same things. The Expense Ratio is slightly different and price, though the investing is very similar for all of the index funds. While they are so close, based on the information given in each link, which of the three do you suggest for a single investment?

https://fundresearch.fidelity.com/mutua ... /808509756

https://fundresearch.fidelity.com/mutua ... /315911404

https://personal.vanguard.com/us/funds/ ... =INT#tab=0

NYBoglehead
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Re: Which Index Fund to choose?

Post by NYBoglehead » Tue Apr 09, 2013 9:09 pm

I am a fan of the Vanguard Total Stock Market Index fund. Low ER, provides exposure to the entirety of the US equity market.

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bottomfisher
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Re: Which Index Fund to choose?

Post by bottomfisher » Tue Apr 09, 2013 9:10 pm

I am bias toward Vanguard; so that fund gets my vote

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BolderBoy
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Re: Which Index Fund to choose?

Post by BolderBoy » Tue Apr 09, 2013 9:10 pm

NYBoglehead wrote:I am a fan of the Vanguard Total Stock Market Index fund. Low ER, provides exposure to the entirety of the US equity market.
If you only want one, single fund, I agree with this.

livesoft
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Re: Which Index Fund to choose?

Post by livesoft » Tue Apr 09, 2013 9:11 pm

They are the same and essentially equivalent. For folks who don't click on links they are Total US Stock Market Index funds from Schwab, Fidelity, and Vanguard.

The 3 funds have different minimum initial investments, so if one could not meet that initial minimum that would eliminate that fund. BrianJone, can you do the research for us and tell us what the initial minimum purchase amount is for each of these funds please?

Another criteria is tax efficiency if this is going in a taxable account. These 3 funds probably pay a similar percentage as a dividend (say 2.2%), but the fraction of that dividend that is qualified will be different. BrianJone, can you do the research for us and tell us what fraction of the 2012 total dividend was qualified for each of these funds please?

There are other criteria to help with the choice. For example, maybe there is a Schwab office across the street, but the Fidelity office is across town, and the Vanguard office doesn't even exist. I can make up a few other esoteric criteria that would matter to someone, but not to most people.
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Twins Fan
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Re: Which Index Fund to choose?

Post by Twins Fan » Tue Apr 09, 2013 9:16 pm

I see some redemption and transaction fees listed on the Schwab and Fideltity funds. Which, I don't believe the Vanguard fund has. And, since we're bogleheads, my vote would be the Vanguard fund!! :happy

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ObliviousInvestor
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Re: Which Index Fund to choose?

Post by ObliviousInvestor » Tue Apr 09, 2013 9:16 pm

livesoft wrote:They are the same and essentially equivalent.
In support of the above message...

The following chart (made using Morningstar's website) compares the three funds' performance over the last 10 years. Yes, there really are three separate performance lines in that picture.
Image
Mike Piper, author/blogger

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BrianJone
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Re: Which Index Fund to choose?

Post by BrianJone » Tue Apr 09, 2013 9:18 pm

NYBoglehead wrote:I am a fan of the Vanguard Total Stock Market Index fund. Low ER, provides exposure to the entirety of the US equity market.
Don't the other two have lower ERs :confused

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tainted-meat
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Re: Which Index Fund to choose?

Post by tainted-meat » Tue Apr 09, 2013 9:20 pm

You're splitting hairs brother. Pick one and don't look back.

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BrianJone
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Re: Which Index Fund to choose?

Post by BrianJone » Tue Apr 09, 2013 9:20 pm

ObliviousInvestor wrote:
livesoft wrote:They are the same and essentially equivalent.
In support of the above message...

The following chart (made using Morningstar's website) compares the three funds' performance over the last 10 years. Yes, there really are three separate performance lines in that picture.
Image

haha wow! really? wow!

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BrianJone
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Re: Which Index Fund to choose?

Post by BrianJone » Tue Apr 09, 2013 9:26 pm

livesoft wrote: The 3 funds have different minimum initial investments, so if one could not meet that initial minimum that would eliminate that fund. BrianJone, can you do the research for us and tell us what the initial minimum purchase amount is for each of these funds please?
I quality for all 3 Min's so that won't matter, but I can to do this research if those numbers will matter even though i qualify for all three.
livesoft wrote:Another criteria is tax efficiency if this is going in a taxable account. These 3 funds probably pay a similar percentage as a dividend (say 2.2%), but the fraction of that dividend that is qualified will be different. BrianJone, can you do the research for us and tell us what fraction of the 2012 total dividend was qualified for each of these funds please?
This fund is for my Roth IRA

livesoft wrote:There are other criteria to help with the choice. For example, maybe there is a Schwab office across the street, but the Fidelity office is across town, and the Vanguard office doesn't even exist. I can make up a few other esoteric criteria that would matter to someone, but not to most people.
nothing that matters to me here either. just wondering if there was a way to decide between the three.

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BrianJone
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Re: Which Index Fund to choose?

Post by BrianJone » Tue Apr 09, 2013 9:35 pm

BrianJone wrote:
NYBoglehead wrote:I am a fan of the Vanguard Total Stock Market Index fund. Low ER, provides exposure to the entirety of the US equity market.
Don't the other two have lower ERs :confused

can anyone help answer this please? thank you :sharebeer

livesoft
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Re: Which Index Fund to choose?

Post by livesoft » Tue Apr 09, 2013 9:36 pm

You can answer the ER question for yourself. What are the expense ratios of the three funds?

Then another criteria might be what do you want your portfolio to look like in 10 years. Which vendor will have the funds that you would like to have in 10 years? Which vendor do you wish to establish a long-term relationship with? You will have to start such a relationship if you do not have such a relationship already started. That relationship may not depend very much on this particular fund or asset class. Other things should probably be more important.

Although I own none of these funds today, I can say that at one time I owned the Schwab fund and the Vanguard fund. I currently own other Fidelity Spartan funds. I owned the Vanguard fund first. Then the Schwab fund because I only wanted to invest $100 (way below the minimum for the other two). I own the Fidelity Spartan funds because that is what my 401(k) offers. So the reasons have varied and there have been legitimate (to me) reasons to own each of them at different time points.

OTOH, if you come to a Vanguard-centric internet forum and ask if you should buy a Vanguard fund or a similar fund from another institution, don't you think that most people are going to recommend the Vanguard fund without thinking about it?
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BrianJone
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Re: Which Index Fund to choose?

Post by BrianJone » Tue Apr 09, 2013 9:50 pm

livesoft wrote:You can answer the ER question for yourself. What are the expense ratios of the three funds?
Do I use Net or Gross ER? and if these funds are almost the exact same in every other aspect of their history and likely stay the same in the future, is the lowest ER the best way to choose between the three?
thank you!

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CABob
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Re: Which Index Fund to choose?

Post by CABob » Tue Apr 09, 2013 9:51 pm

Vanguard has a tool to compare funds.
https://personal.vanguard.com/us/funds/ ... tingFrom=2
I don't see much difference.
Bob

livesoft
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Re: Which Index Fund to choose?

Post by livesoft » Tue Apr 09, 2013 9:53 pm

No, you would not use lowest ER to choose. I thought I was being very clear that once you have equivalent funds with nearly equivalent expense ratios that other things mattered more.

I would use NET expense ratio, but you have to wonder why NET and GROSS are different.

Let me ask you a question: Suppose the following 6-packs all cost the same: Bud Lite, Miller Lite, Coors Lite. Which 6-pack should I buy?
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Twins Fan
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Re: Which Index Fund to choose?

Post by Twins Fan » Tue Apr 09, 2013 9:56 pm

BrianJone, I checked out some of your previous posts/threads... it seems you are REALLY OVERTHINKING this starting a Roth IRA deal!!

You are just getting started in this whole investing deal, right? The important thing for you now is to start and contribute. You're splitting hairs over which total stock index fund to pick, and total stock vs. total international (prior thread). Stop that!! Pick a place to start your Roth, open it up, and pick a fund!!

Being that you're opening a Roth, my suggestion would be to open it with Vanguard and pick a LifeStrategy or Target Retirment fund and be done with it. But, that's already been suggested to you before in other threads hasn't it? You're worrying about things that shouldn't even be on your radar yet. If you want to split it up into separate funds later on and really fine tune your AA, you can. But, for now, just get it started!!

WHL
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Re: Which Index Fund to choose?

Post by WHL » Tue Apr 09, 2013 10:09 pm

livesoft wrote:No, you would not use lowest ER to choose. I thought I was being very clear that once you have equivalent funds with nearly equivalent expense ratios that other things mattered more.

I would use NET expense ratio, but you have to wonder why NET and GROSS are different.

Let me ask you a question: Suppose the following 6-packs all cost the same: Bud Lite, Miller Lite, Coors Lite. Which 6-pack should I buy?
Let me buy you a pint of something good, brother!

BerkeleyChris
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Re: Which Index Fund to choose?

Post by BerkeleyChris » Tue Apr 09, 2013 10:13 pm

Twins Fan wrote:BrianJone, I checked out some of your previous posts/threads... it seems you are REALLY OVERTHINKING this starting a Roth IRA deal!!

You are just getting started in this whole investing deal, right? The important thing for you now is to start and contribute. You're splitting hairs over which total stock index fund to pick, and total stock vs. total international (prior thread). Stop that!! Pick a place to start your Roth, open it up, and pick a fund!!
Brian--

Twins Fan is totally right. If I were you I would go to Vanguard website and open up the Roth if you don't already have one somewhere else. Putting it in perspective, the important thing right now is to make your 2012 contribution before April 15, if you have not already done so, with as much as you feel comfortable putting in up to the max. If you let that deadline pass you by, you can't go back and contribute. On the other hand, if you buy VTSMX now and decide you want to switch to a Vanguard Target Date fund in a little bit, they are not going to charge you to trade, or vice versa. So don't stress out about it!

From what I can tell from your posts, you are going to agonize over some other decisions too. My recommendation to you is to pick a Target Date fund that makes sense to you and let Vanguard handle all of the rebalancing decisions for you. Unless the company changes dramatically, they are not going to take advantage of you and you are going to get excellent value

Good luck!

Chris

livesoft
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Re: Which Index Fund to choose?

Post by livesoft » Tue Apr 09, 2013 10:17 pm

BerkeleyChris wrote:From what I can tell from your posts, you are going to agonize over some other decisions too.
Yep, that beer decision is a really tough one.

@WHL, thank you!
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