Will new index funds ever come out?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
jb1
Posts: 96
Joined: Sun Nov 27, 2016 8:33 am
Location: NC

Will new index funds ever come out?

Post by jb1 » Mon Mar 20, 2017 8:51 am

Hello all,

Currently in VTSMX. Looking to gt into VFINX/AX. However at that price point of $220, is it even worth it? Will a new SP index fund ever come out in the future

User avatar
David Jay
Posts: 3701
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Will new index funds ever come out?

Post by David Jay » Mon Mar 20, 2017 9:03 am

The price of a mutual fund is meaningless. It is a unit-less measurement.

Would you rather buy milk for $2.69 or $0.80? Oh, let me add that the units are gallon and quart respectively.

Do you understand the illustration? The price of a mutual fund is meaningless. There is absolutely no difference between buying 10 shares at $220 (Vanguard fund), 2 shares at $1100 (theoretical Company "A" fund) or 50 shares at $44 (theoretical Company B fund). Each version purchases $2200 worth of cap-weighted SP500 stocks.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

jb1
Posts: 96
Joined: Sun Nov 27, 2016 8:33 am
Location: NC

Re: Will new index funds ever come out?

Post by jb1 » Mon Mar 20, 2017 9:07 am

David Jay wrote:The price of a mutual fund is meaningless. It is a unit-less measurement.

Would you rather buy milk for $2.69 or $0.80? Oh, let me add that the units are gallon and quart respectively.

Do you understand the illustration? The price of a mutual fund is meaningless. There is absolutely no difference between buying 10 shares at $220 (Vanguard fund), 2 shares at $1100 (theoretical Company "A" fund) or 50 shares at $44 (theoretical Company B fund). Each version purchases $2200 worth of cap-weighted SP500 stocks.


Great point. I know people here love the 3 fund system, but would you recommend VFINX?

Jags4186
Posts: 1114
Joined: Wed Jun 18, 2014 7:12 pm

Re: Will new index funds ever come out?

Post by Jags4186 » Mon Mar 20, 2017 9:26 am

jb1 wrote:
David Jay wrote:The price of a mutual fund is meaningless. It is a unit-less measurement.

Would you rather buy milk for $2.69 or $0.80? Oh, let me add that the units are gallon and quart respectively.

Do you understand the illustration? The price of a mutual fund is meaningless. There is absolutely no difference between buying 10 shares at $220 (Vanguard fund), 2 shares at $1100 (theoretical Company "A" fund) or 50 shares at $44 (theoretical Company B fund). Each version purchases $2200 worth of cap-weighted SP500 stocks.


Great point. I know people here love the 3 fund system, but would you recommend VFINX?


There's no reason to move from total stock market to sp500 fund if you want to implement a 3 fund portfolio. The only reason you'd switch is if you were trying to tax loss harvest.

If you're trying to slice and dice you'd probably prefer the sp500 fund as it is a singular asset class whereas the TSM holds everything.
Last edited by Jags4186 on Mon Mar 20, 2017 9:28 am, edited 1 time in total.

User avatar
David Jay
Posts: 3701
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Will new index funds ever come out?

Post by David Jay » Mon Mar 20, 2017 9:27 am

jb1 wrote:Great point. I know people here love the 3 fund system, but would you recommend VFINX?


What is your goal? If your goal is to "own the market" with no sector tilts, Total Stock (VTSMX) is probably the purest single fund available for holding the entire US market. Buying an SP500 fund will (slightly) tilt your portfolio towards large-cap and mid-cap stocks. Is that your objective?

I tilt my portfolio to small-cap value, but the large majority of my US holdings are Total Stock. But that allocation flows from my my goals, not from reading commentators on BH. If you don't know your goals, how will you know when you have reached them?

WIKI on IPS here: https://www.bogleheads.org/wiki/Investm ... _statement
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

jb1
Posts: 96
Joined: Sun Nov 27, 2016 8:33 am
Location: NC

Re: Will new index funds ever come out?

Post by jb1 » Mon Mar 20, 2017 12:04 pm

David Jay wrote:
jb1 wrote:Great point. I know people here love the 3 fund system, but would you recommend VFINX?


What is your goal? If your goal is to "own the market" with no sector tilts, Total Stock (VTSMX) is probably the purest single fund available for holding the entire US market. Buying an SP500 fund will (slightly) tilt your portfolio towards large-cap and mid-cap stocks. Is that your objective?

I tilt my portfolio to small-cap value, but the large majority of my US holdings are Total Stock. But that allocation flows from my my goals, not from reading commentators on BH. If you don't know your goals, how will you know when you have reached them?

WIKI on IPS here: https://www.bogleheads.org/wiki/Investm ... _statement


Thank you.

Objective is to have money to takeout within the next 10-15 years, minus the IRA
I have a roth ira which Ive max out since 2013 (26 now).

Have 17k in low volatile ETFs (want to withdraw when im 35)

Have 5.5k in VTSMX (plan on adding $300 a month to it, withdraw when im 40).

Hoping i can land a job to have income lol, which would make everything way easier. I only make 20k a year now.

harvestbook
Posts: 266
Joined: Sat Mar 18, 2017 7:12 pm

Re: Will new index funds ever come out?

Post by harvestbook » Mon Mar 20, 2017 12:41 pm

Wow, at 26 I could barely think past Friday. Good for you saving, especially at that income level. It's not clear to me whether you have specific target-dated goals (such as wanting to buy a house when you are 35, therefore it's a specific target rather than a general target of "I want to have a pile of money to do something with but can also let it ride if I want") If I were that far out, I'd overweight small caps personally, like maybe 70 percent VTSMX and 30 percent VISVX, unless I specifically needed the money at that time, then I'd probably ease off the small caps as the target approached. I don't think you can go wrong with VTSMX in most scenarios, though most would advise moving more to bonds as the target approaches if you can't risk a big drop that would take years to recover from.

For comparison, I have an HSA that I won't touch for at least 10 years and it is 40 percent VTSMX, 30 percent VGTSX total international, and 30 percent NAESX (small-cap blend index. The key is that I don't have to take money out at that time and if necessary can let it recover from any dips and draw on other sources (if I live long enough, of course!) The planned use of the money, risk appetite, and the time horizon are among the biggest factors in most people's AA. My philosophy is just don't get squeezed into a position where you are forced to sell by life circumstances so you can keep options open. Good luck.
I'm not smart enough to know, and I can't afford to guess.

User avatar
WallStreetPhysician
Posts: 94
Joined: Tue Jan 17, 2017 12:09 pm
Contact:

Re: Will new index funds ever come out?

Post by WallStreetPhysician » Mon Mar 20, 2017 1:38 pm

As others have said, the price does not matter, especially for mutual funds, where you can buy fractional "shares".

User avatar
David Jay
Posts: 3701
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Will new index funds ever come out?

Post by David Jay » Wed Mar 22, 2017 2:33 pm

jb1 wrote:Objective is to have money to takeout within the next 10-15 years... Have 5.5k in VTSMX (plan on adding $300 a month to it, withdraw when im 40).


I would hold Total Stock until 5 years before withdrawal, then I would sell 20% per year and put the money into bonds (Short Term Bond fund) or cash (interest bearing savings account). 5 years is really the minimum time (before withdrawal) that you should hold 100% stocks.

I am going through the same steps now, but in preparation for retirement. I will be living from savings for 6 years from (early) retirement until start of Social Security benefits. I was 100% in stocks 4 years ago, I am moving a portion of my stock portfolio into bonds each year. When I retire (similar to when you want to spend your money) in less than 2 years, I want to have 6 years of living expenses in bonds, out of the reach of stock market volatility.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Rainmaker41
Posts: 374
Joined: Tue Apr 26, 2016 11:34 am

Re: Will new index funds ever come out?

Post by Rainmaker41 » Wed Mar 22, 2017 2:47 pm

jb1 wrote:I only make 20k a year now.


OP: You can use the Saver's Credit and get a large chunk of Federal taxes back! I did this for 2015 tax year, got under the $18,250 AGI threshold, and wiped out all federal income taxes.

:)

https://www.irs.gov/retirement-plans/pl ... ers-credit
My username is not about money, but is my old online gaming username. I can't say that I make a great deal of money; I just hate spending it. Marrying the most loving woman in the world October 2017.

tesuzuki2002
Posts: 42
Joined: Fri Dec 11, 2015 12:40 pm

Re: Will new index funds ever come out?

Post by tesuzuki2002 » Wed Mar 22, 2017 3:04 pm

Nice work!
Last edited by tesuzuki2002 on Wed Mar 22, 2017 3:05 pm, edited 1 time in total.

tesuzuki2002
Posts: 42
Joined: Fri Dec 11, 2015 12:40 pm

Re: Will new index funds ever come out?

Post by tesuzuki2002 » Wed Mar 22, 2017 3:04 pm

Rainmaker41 wrote:
jb1 wrote:I only make 20k a year now.


OP: You can use the Saver's Credit and get a large chunk of Federal taxes back! I did this for 2015 tax year, got under the $18,250 AGI threshold, and wiped out all federal income taxes.

:)

https://www.irs.gov/retirement-plans/pl ... ers-credit




Awesome job!!! I've always been disappointed that I haven't been able to attain that credit... high earner problems.

User avatar
David Jay
Posts: 3701
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Will new index funds ever come out?

Post by David Jay » Thu Mar 23, 2017 11:42 am

Rainmaker41 wrote:
jb1 wrote:I only make 20k a year now.


OP: You can use the Saver's Credit and get a large chunk of Federal taxes back! I did this for 2015 tax year, got under the $18,250 AGI threshold, and wiped out all federal income taxes.

:)

https://www.irs.gov/retirement-plans/pl ... ers-credit

+1 My son started his first job mid-year and earned about $15,000. He made a $1000 Roth contribution and got an additional $500 back on his income tax return.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Post Reply