Considering S&P 500 Index and Total Stock Market Index in portfolio....

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Enjoy the good life
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Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by Enjoy the good life » Fri Mar 25, 2016 5:06 pm

Hi all,
I have liberated myself from my financial advisor and am self-directed in my pension-profit sharing plan and taxable plan. Because Vanguard does not use FBO status, my pension profit plan is at Fidelity. My traditional IRA and taxable plan is at Vanguard. Question: I am considering using a combination of the Fidelity S&P 500 Index Fund and Fidelity Total Market Index Fund (50/50 or 60/40 proportion) in my tax advantaged plan. Why? Because I would have a little more tilt toward the large companies with the 500 Index and perhaps sustain less drop in stock index performance should the market pull back. The TSM Index would give more investments in small and medium companies and chance for greater performance when the market heads in that direction with these companies. Any thoughts about this idea? Overall, I am going to use Index funds for my portfolios. Taxable will be intermediate tax exempt muni bond fund at Vanguard and TSM Index.
Thanks!

bloom2708
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by bloom2708 » Fri Mar 25, 2016 5:09 pm

You can do whatever you want, but the two are 80% overlap.

You don't get "bonus" returns by owning Total US and S&P 500.

I wouldn't recommend it. You would be better off having 20% International for diversity.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

john94549
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by john94549 » Fri Mar 25, 2016 5:22 pm

I would second the advice above, i.e., having a touch of international (say, 15%). While current performance of international funds might underwhelm, long-term investors seem happy with a tad of international.

Were I to craft a "set and forget" portfolio for a person in one's accumulation years, I would be hard-pressed to beat VBIAX with a sprinkling of VTIAX for flavor.
Last edited by john94549 on Fri Mar 25, 2016 5:28 pm, edited 1 time in total.

Enjoy the good life
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by Enjoy the good life » Fri Mar 25, 2016 5:26 pm

Look at the returns of International Index Fund.....over last 15-25 years.....very underwhelming. Let's face it....our work usually spans 25-35 years.... International funds just drag our returns down. I agree with John Bogle in his not really investing in international index funds. TSM Index has enough to US companies that have international exposure...GE is one of many such companies. International Index funds are too risky! Go look at the charts!!

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whodidntante
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by whodidntante » Fri Mar 25, 2016 5:30 pm

Enjoy the good life wrote:Look at the returns of International Index Fund.....over last 15-25 years.....very underwhelming. Let's face it....our work usually spans 25-35 years.... International funds just drag our returns down. I agree with John Bogle in his not really investing in international index funds. TSM Index has enough to US companies that have international exposure...GE is one of many such companies. International Index funds are too risky! Go look at the charts!!
The strong dollar is making it look worse. But the flip side is your dollar is buying you more shares overseas right now.

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CABob
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by CABob » Fri Mar 25, 2016 8:26 pm

This is not a recommendation but you might consider the 500 or TSM (not both) plus a small cap fund with your desired allocation between the two funds. This could accomplish what I think you are trying to do.
Bob

heyyou
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by heyyou » Sat Mar 26, 2016 2:49 am

Over long periods, whatever does poorly for a while, often does better later.

Most here would choose one or the other of the two, but both the 500 and the Total Market will perform so similar that you won't miss anything by using both. Thus you can change later, if and when you want to.

RandomWalking
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by RandomWalking » Sat Mar 26, 2016 3:47 am

heyyou wrote:Over long periods, whatever does poorly for a while, often does better later.
What is the evidence for the above statement? The statement seems misleading (to me).

I beg to differ with a counter example from the evidence of survival of the fittest in the index fund literature e.g. a poorly performing active managed fund may not survive to a later date because it is removed from the list of funds in an actively managed fund house.

gd
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by gd » Sat Mar 26, 2016 7:21 am

I've had both, it's about a wash. Look at Vanguard's fund comparisons over various ranges and convince yourself, or not. I use TSM because it makes me feel better. If you want enough mid- and small-cap to make a real difference, buy a separate index for that in a larger percentage than TSM adds to SP500.

camaro327
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by camaro327 » Sat Mar 26, 2016 8:00 am

CABob wrote:This is not a recommendation but you might consider the 500 or TSM (not both) plus a small cap fund with your desired allocation between the two funds. This could accomplish what I think you are trying to do.
+1

As others have said these two are almost identical in performance. I would add a small cap fund or international for diversification.

Tc99
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Re: Considering S&P 500 Index and Total Stock Market Index in portfolio....

Post by Tc99 » Sat Mar 26, 2016 8:13 am

If you ever plan to tax loss harvest TSM in taxable you won't want it in your IRA. Just a thought.

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