Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

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tchasteen
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Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by tchasteen » Wed Apr 19, 2017 5:28 pm

Hi all,

I've done some research and have been informed that the VINIX (which I'm planning on investing heavily in) is lacking small and mid-cap by a few percent points. Can you point me in the right direction on balancing my portfolio regarding large, mid, and small-cap?

Thanks,
Tim
Last edited by tchasteen on Wed Apr 19, 2017 5:50 pm, edited 1 time in total.

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Munir
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Re: VINIX - Lacking Small and Mid-Cap

Post by Munir » Wed Apr 19, 2017 5:33 pm

tchasteen wrote:Hi all,

I've done some research and have been informed that the VINIX (which I'm planning on investing heavily in) is lacking small and mid-cap by a few percent points. Can you point me in the right direction on balancing my portfolio regarding large, mid, and small-cap?

Thanks,
Tim
Hi Tim,

You will get more responders to your post if you include the full name of the fund you want discussed- at least in your initial post.

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backpacker
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Re: VINIX - Lacking Small and Mid-Cap

Post by backpacker » Wed Apr 19, 2017 5:33 pm

For those who haven't googled it, VINIX is the institutional version Vanguard's S&P 500 fund. What you want to add is the Vanguard Extended Market fund. More information on using multiple funds to approximate the total market can be found in this wiki article.

tchasteen
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by tchasteen » Wed Apr 19, 2017 5:54 pm

I appreciate the tip on changing the title to the full name.

So using that link I found:

81% Vanguard 500 Index Fund (VFINX)
19% Vanguard Extended Market Index Fund (VEXMX)

Is VFINX essentially the same as VINIX, so I need 81% VINIX and 19% VEXMX to represent the total market?

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badbreath
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by badbreath » Wed Apr 19, 2017 9:39 pm

yes I have been doing that for years since that what is offered to me in my fund
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

MotoTrojan
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by MotoTrojan » Wed Apr 19, 2017 11:23 pm

For what it is worth, I hold Total Stock Market (plus a Small-cap Value tilt and International) but if you compare the longterm returns between S&P 500 (or just Large-cap) and TSM, it is pretty amazing how similar they are. Doing the 80/20 won't hurt, but if it is easier (no rebalancing) to just toss it all into VINIX, I would not hesitate.

You could also consider overweighting extended-market, to tilt more towards Small/Mid-cap.

rkhusky
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by rkhusky » Thu Apr 20, 2017 11:00 am

According to Morningstar's definitions of size, the S&P 500 does contain a healthy dose of mid-cap stocks, so they are really just missing the small-cap and some mid cap.

MotoTrojan
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by MotoTrojan » Thu Apr 20, 2017 12:11 pm

rkhusky wrote:According to Morningstar's definitions of size, the S&P 500 does contain a healthy dose of mid-cap stocks, so they are really just missing the small-cap and some mid cap.
It's all subjective. Morningstar says Vanguards CRSP small funds are 50/50 small/mid; ~2X the median cap size of SP600 and R2000.

NiceUnparticularMan
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by NiceUnparticularMan » Thu Apr 20, 2017 12:37 pm

MotoTrojan wrote:For what it is worth, I hold Total Stock Market (plus a Small-cap Value tilt and International) but if you compare the longterm returns between S&P 500 (or just Large-cap) and TSM, it is pretty amazing how similar they are. Doing the 80/20 won't hurt, but if it is easier (no rebalancing) to just toss it all into VINIX, I would not hesitate.

You could also consider overweighting extended-market, to tilt more towards Small/Mid-cap.
Using an SP500 fund instead of TSM is actually handy if you want to minimize your exposure to small growth in particular (which you might if you believe it is likely to produce negative alpha in a three-factor model, and/or is a proxy for avoiding what would be adverse factor exposure in a model with more than three factors). You can then combine that SP500 fund with something like Vanguard's Small Value fund instead of extended market, and voila, you minimize your small growth box.

tchasteen
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by tchasteen » Fri Apr 21, 2017 5:59 am

Thanks folks,

My 457 (like a 401k) fund only offers the Vanguard Institutional Index Fund and a Small-Cap, however, I can invest in the extended market fund through my Vanguard Roth IRA. When you folks start talking about tilting toward or away from small-cap or small growth, it's a bit over my head! I just want to keep things as close to the US Market as possible, it's simple enough for me to understand and seems to be a viable investing strategy.

NiceUnparticularMan
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by NiceUnparticularMan » Fri Apr 21, 2017 6:21 am

tchasteen wrote:My 457 (like a 401k) fund only offers the Vanguard Institutional Index Fund and a Small-Cap, however, I can invest in the extended market fund through my Vanguard Roth IRA. When you folks start talking about tilting toward or away from small-cap or small growth, it's a bit over my head! I just want to keep things as close to the US Market as possible, it's simple enough for me to understand and seems to be a viable investing strategy.
Very reasonable strategy.

Depending on the small cap fund, you might be able to combine it with the SP500 and end up with something virtually indistinguishable from a total market portfolio (SP500 is already close, and exactly how you do that final tweak is not necessarily all that important). If you tell us what it is we might be able to give you advice on that subject.

MotoTrojan
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by MotoTrojan » Fri Apr 21, 2017 9:20 am

tchasteen wrote:Thanks folks,

My 457 (like a 401k) fund only offers the Vanguard Institutional Index Fund and a Small-Cap, however, I can invest in the extended market fund through my Vanguard Roth IRA. When you folks start talking about tilting toward or away from small-cap or small growth, it's a bit over my head! I just want to keep things as close to the US Market as possible, it's simple enough for me to understand and seems to be a viable investing strategy.
Ignore the tilt talk, no need to think about that then if you prefer to stay at market weight (TSM).

https://www.portfoliovisualizer.com/bac ... allocation

Take a look at portfolio visualizer and compare a 100% Total Stock Market portfolio from 1972-now, with a 100% Large-cap (essentially S&P500). You may find the complexity of TSM isn't that necessary when you can get S&P500 via one fund. From 1972-now the CAGR difference was 0.01% for $10K/year contribution (18.80% for TSM vs. 18.79% for Large-cap); you won't notice that, the lowest ER Vanguard offers is bigger than that :sharebeer.

Having said that, is your small-cap fund also a Vanguard option? If so, as I said earlier, it's CRSP index is actually about 2x as large as S&P600 & Russell 2000, and by many definitions it is 50/50 Small/Mid. Thus, holding Institutional & Vanguard Small-cap would be a great representation of TSM; probably close to 80/20 ratio but there are threads for that specific combo. If you are intent on getting closer to the true TSM, I would do this, rather than hold extended market in a Roth and possibly make future rebalancing difficult, across two accounts.

tchasteen
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by tchasteen » Sat Apr 22, 2017 1:36 pm

NiceUnparticularMan and MotoTrojan,

The two options offered to me are Vanguard Institutional Index (VIIIX) and Vanguard Small-Cap Index (VSCPX). So if using a percentage of those two could get me close to TSM, I would be happy to do that for the simplicity of it!

Thanks for your help.

tchasteen
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by tchasteen » Sat Apr 22, 2017 1:36 pm

I would just need to know what percentage of each!


MotoTrojan
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by MotoTrojan » Sat Apr 22, 2017 1:50 pm

tchasteen wrote:NiceUnparticularMan and MotoTrojan,

The two options offered to me are Vanguard Institutional Index (VIIIX) and Vanguard Small-Cap Index (VSCPX). So if using a percentage of those two could get me close to TSM, I would be happy to do that for the simplicity of it!

Thanks for your help.
Awesome. Great low cost combo to do just that.

NiceUnparticularMan
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by NiceUnparticularMan » Sat Apr 22, 2017 2:13 pm

MotoTrojan wrote:Awesome. Great low cost combo to do just that.
Yep. Linked resource says 82-18, so do that and you are good to go.

tchasteen
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Re: Vanguard Institutional Index Fund Institutional Shares - Lacking Small and Mid-Cap

Post by tchasteen » Sun May 07, 2017 8:30 am

I just finished getting the 457 all set up with the 82-18 percentages. I appreciate it gentleman! :beer

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