VTSMX vs Schwab Total Stock Market Index Fund

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2m2037
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VTSMX vs Schwab Total Stock Market Index Fund

Post by 2m2037 »

https://www.schwab.com/public/schwab/nn ... ml?van=tqn

Am I missing something or does the Schwab Total Stock Market Index Fund look like a better option compared to Vanguard Total Stock Market fund, since it has lower costs?
ray333
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by ray333 »

I believe Schwab tracks the Dow while Vanguard's tracks Wilshire 5000 ...

Maybe Vanguard more diverse / more stocks?
NiceUnparticularMan
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by NiceUnparticularMan »

According to the latest fact sheets, the Dow index (Schwab) currently has 3784 constituents, the CRSP index (Vanguard) currently has 3563.

I don't really see a reason to prefer one or the other based on index. I wouldn't take on any hassle for such a low ER difference, but if the Schwab fund was convenient I wouldn't have a problem using it.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by zhiwiller »

It holds 2,367 stocks to VTSMX's 3,575. Will that matter? Probably not. I'd feel comfortable with either and would be put out by Vanguard's expensive-in-comparison 0.15%. I know Schwab subsidizes it to keep the expense ratio low, but even if they didn't, it would probably be a nominal difference.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by sschoe2 »

I heard on another forum Schwab's Total Stock Market Index was much less tax efficient.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by nisiprius »

I won't try to be evasive. Nope, there's no obvious reason to prefer the Vanguard fund. Does the difference matter much, enough to prefer the Schwab fund? Not to me. Others might not agree. The difference is so paper-thin that my judgement is that the expense ratio difference is a featherweight on the decision scale and that almost anything else could tip the balance.

They're peas in a pod. They're about the same.

1) For a $10,000 minimum, you can get Vanguard Total Stock Admiral Shares, VTSAX, with an expense ratio of 0.04%.

2) Yes, the Schwab fund, SWTSX has a lower expense ratio of 0.03%. Yes, if you have less than $10,000 to invest, Schwab is friendlier. Their minimum, to get that 0.03% ER is... whoa... really? $1.00? (I was about to say $100, but they've reduced it). To newer and younger investors, Schwab seems to extend a warmer welcome than Vanguard.

SWTSX Fund Facts and Fees
Image

3) What matters with expense ratios is the absolute difference, not the ratio. The difference between 1.25% and 0.25% is 1.0%, that's huge. The difference between 0.25% and 0.05% is only 0.2%, that's only 1/5th as important.

4) Always do the math on expense ratios and figure out "how much is that in dollars." Here's how it look graphically. Blue, the Schwab fund, SWSTX, currently (but only recently) 0.03% ER. Orange, the Vanguard Admiral Shares fund, VTSAX, current 0.04% ER. Green, Vanguard Investor Shares, VTSMX.

I didn't actually expect this, but oddly enough, over the time period during which SWSTX has existed, a $10,000 investment in either Vanguard fund would actually have earned just the tiniest amount more than it would have in the Schwab fund. I don't know why. Could be just a glitch, could be just due to the past history of the expense ratios, could be "transactional skill" and securities lending on Vanguard's part. The main point is not the Vanguard happened outperform Schwab, but that once you get expense ratios down into less-than 0.20% territory, they're not much of a differentiating factor.

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ruralavalon
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by ruralavalon »

imperio wrote:https://www.schwab.com/public/schwab/nn ... ml?van=tqn

Am I missing something or does the Schwab Total Stock Market Index Fund look like a better option compared to Vanguard Total Stock Market fund, since it has lower costs?
The expense ratio difference is tiny, I would not switch funds on those basis of that difference. If I had my accounts at Schwab, instead of Vanguard, I would use the Schwab Total Stock Market Index Fund. My accounts are at Vanguard and I will continue to use Vanguard Total Stock Market Index Fund.

1) The funds use different indexes, Vanguard Total Stock Market Index Fund holds a greater number of stocks so is more diversified,
2) the performance of the two funds has been nearly identical,
3) the Schwab fund has regularly distributed both long-term and short-term capital gains while the Vanguard fund has not, so the Vanguard fund is more tax-efficient,
4) compared to Admiral Shares of Vanguard funds, the Schwab fund has a lower expense ratio by a difference of just 0.01%,
5) The Schwab initial minimum investment at $1 is a significant advantage for the young or new investor which a modest income.
Last edited by ruralavalon on Wed May 24, 2017 5:08 pm, edited 1 time in total.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by robertmcd »

I would consider Vanguard's to be better for a few reasons:

I am more confident that vanguard will hold the ER at .04 or even lower it over the next 30 years than schwab. Therefore if I have capital gains and I am locked in for the rest of my life I would rather be at vanguard than schwab.

Vanguard's TSM holds more stocks, and ventures lower into the small/micro caps to duplicate the total us stock market better than the schwab fund.

Vanguard's has an etf share class (VTI) of its mutual fund which increases the tax efficiency of the mutual fund. The only way to get this efficiency at schwab would be to use their total stock market ETF thus forcing you to pay for bid/ask spreads (they are small), and I like being able to simply invest $1000 and not have to do the math to see how many shares to buy.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by Digger1000 »

Would the difference in the past returns be due to Schwab having a higher ER than it currently does? Does anyone know what Schwab's ER was before? The S&P 500 returns have also been higher for Vanguard than Schwab. I need to rollover some 401k monies into IRAs and I'm trying to decide between Vanguard and Schwab. All of my taxable monies are with Vanguard and I will leave them there.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by lack_ey »

nisiprius wrote:I didn't actually expect this, but oddly enough, over the time period during which SWSTX has existed, a $10,000 investment in either Vanguard fund would actually have earned just the tiniest amount more than it would have in the Schwab fund. I don't know why. Could be just a glitch, could be just due to the past history of the expense ratios, could be "transactional skill" and securities lending on Vanguard's part. The main point is not the Vanguard happened outperform Schwab, but that once you get expense ratios down into less-than 0.20% territory, they're not much of a differentiating factor.
Schwab's expense ratios were historically higher until relatively recently. For example for one spot check, in 2012 SWSTX had a net ER of 0.09%. Not bad but Vanguard's was 0.06%. That kind of differential can be wiped out by differences in securities lending practices, though.

Is there a greater difference going further back? I could believe that the difference used to be larger. I'd check but I'm not curious enough to really care about past availability. Also, I don't think the fund used to be called by the current name, so it might be nontrivial to confirm.

In any case, the more relevant consideration today is that in a taxable account, Vanguard's fund is better because it is fused with the ETF and is thus likely to distribute less capital gains.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by Explorer »

I have accounts at both Schwab and Vanguard - and I use both funds.

FWIW, Vanguard TSM distributes divvy quarterly while Schwab TSM only does so annually- not a big deal but just another difference between the two.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by ruralavalon »

lack_ey wrote:
nisiprius wrote:I didn't actually expect this, but oddly enough, over the time period during which SWSTX has existed, a $10,000 investment in either Vanguard fund would actually have earned just the tiniest amount more than it would have in the Schwab fund. I don't know why. Could be just a glitch, could be just due to the past history of the expense ratios, could be "transactional skill" and securities lending on Vanguard's part. The main point is not the Vanguard happened outperform Schwab, but that once you get expense ratios down into less-than 0.20% territory, they're not much of a differentiating factor.
Schwab's expense ratios were historically higher until relatively recently. For example for one spot check, in 2012 SWSTX had a net ER of 0.09%. Not bad but Vanguard's was 0.06%. That kind of differential can be wiped out by differences in securities lending practices, though.

Is there a greater difference going further back? I could believe that the difference used to be larger. I'd check but I'm not curious enough to really care about past availability. Also, I don't think the fund used to be called by the current name, so it might be nontrivial to confirm.

In any case, the more relevant consideration today is that in a taxable account, Vanguard's fund is better because it is fused with the ETF and is thus likely to distribute less capital gains.
Please see the graph which nisiprius included in his post. Over 18 years since the inception of Schwab Total Stock Market Index Fund --
1) Vanguard Total Stock Market Index Fund Investor Shares returned $55 ($3.05/yr) more than the Schwab fund, and
2) Vanguard Total Stock Market Index Fund Admiral Shares returned $1040 ($57.77/yr) more than the Schwab fund.

These tiny differences in expense ratio produce tiny, essentially meaningless, differences in returns. Other factors (such as index used, tracking error, turnover, tax efficiency, securities lending) may be have more impact.

If our accounts were at Schwab we would use the Schwab fund. Since our accounts are at Vanguard, we will continue to use the Vanguard fund.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by Nate79 »

I guess everyone has a different definition of difference but to me 3% over 18 years is a pretty significant difference between Vanguard and Schwab. Expenses add up and I would be happy to have a few percent extra in my account in retirement by going with Vanguard vs Schwab.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by rkhusky »

Nate79 wrote:I guess everyone has a different definition of difference but to me 3% over 18 years is a pretty significant difference between Vanguard and Schwab. Expenses add up and I would be happy to have a few percent extra in my account in retirement by going with Vanguard vs Schwab.
The question is - will you get 3% extra over the next 18 years.
imperio wrote:https://www.schwab.com/public/schwab/nn ... ml?van=tqn

Am I missing something or does the Schwab Total Stock Market Index Fund look like a better option compared to Vanguard Total Stock Market fund, since it has lower costs?
0.12% of $10K is $12.

0.01% of $1M is $100.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by topcatin »

I am in the process of moving very small amount ($680) from my eTRADE brokerage account to either Vanguard's brokerage or one at Schwabs.

Schwab's $1 minimum is great but their brokerage account minimum balance is $1000, so even though the total stock market fund has a $1 minimum, you will need $1000 to open a brokerage account :(.
Vanguard's trading fee on company stocks is $7.99 verses $4.95 at Schwab. Regardless, Schwab seems to be a better option to start off if one has less money to start worth.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by onourway »

topcatin wrote:I am in the process of moving very small amount ($680) from my eTRADE brokerage account to either Vanguard's brokerage or one at Schwabs.

Schwab's $1 minimum is great but their brokerage account minimum balance is $1000, so even though the total stock market fund has a $1 minimum, you will need $1000 to open a brokerage account :(.
Vanguard's trading fee on company stocks is $7.99 verses $4.95 at Schwab. Regardless, Schwab seems to be a better option to start off if one has less money to start worth.
Schwab will waive the minimum if you either set up a $100 automatic investment or if you also open a checking account with them. In that case there is no minimum and no ongoing commitment.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by KyleAAA »

They both have such low expense ratios that in reality the decision will come down to 1.) which website interface do you prefer (plus Schwab has actual branches if that's important to you), and 2.) which can you buy/sell for free (both allow you to buy/sell their own funds on their own platforms for free. See #1 above). Vanguard does have index funds in a wider variety of asset classes than Schwab but if you plan to stick with a 3-fund portfolio that won't make much difference. And you can fill in the gaps with ETFs, of which Schwab has plenty of good low-cost ones on their no-commission list.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by pkcrafter »

Schwab's move is motivated by the same thing as Fidelity, stop the outflow of $$ to Vanguard, even it it means operating at a small loss. I noticed that the turnover in Schwab's fund is only 1%, Vanguard's is 4%. I know they are using different indices, but is Schwab trying to cut cost a bit here, or is 1% the actual turnover of the benchmark? The normal rebalancing of the Dow index occurs every quarter.

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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by ruralavalon »

topcatin wrote:I am in the process of moving very small amount ($680) from my eTRADE brokerage account to either Vanguard's brokerage or one at Schwabs.

Schwab's $1 minimum is great but their brokerage account minimum balance is $1000, so even though the total stock market fund has a $1 minimum, you will need $1000 to open a brokerage account :(.
Vanguard's trading fee on company stocks is $7.99 verses $4.95 at Schwab. Regardless, Schwab seems to be a better option to start off if one has less money to start worth.
Schwab is a good place to start for a new or young investor with a modest income and a relatively small amount to invest.

Do you have an IRA? In general it's better (because of the tax advantage) to start with an IRA rather than a taxable brokerage account.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
topcatin
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by topcatin »

ruralavalon wrote:
topcatin wrote:I am in the process of moving very small amount ($680) from my eTRADE brokerage account to either Vanguard's brokerage or one at Schwabs.

Schwab's $1 minimum is great but their brokerage account minimum balance is $1000, so even though the total stock market fund has a $1 minimum, you will need $1000 to open a brokerage account :(.
Vanguard's trading fee on company stocks is $7.99 verses $4.95 at Schwab. Regardless, Schwab seems to be a better option to start off if one has less money to start worth.
Schwab is a good place to start for a new or young investor with a modest income and a relatively small amount to invest.

Do you have an IRA? In general it's better (because of the tax advantage) to start with an IRA rather than a taxable brokerage account.
Hi..yes I do have an IRA. I just wanted to set aside a small amount ($687 to be exact :) ) in a brokerage account and see if I can buy company stocks or a total stock market fund. I am ok with taking risks here and just test the markets and see if I can make some profit..I know this is wishful thinking and fully aware that picking company stocks is not encouraged here at bogleheads:).
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by munemaker »

pkcrafter wrote:Schwab's move is motivated by the same thing as Fidelity, stop the outflow of $$ to Vanguard, even it it means operating at a small loss.

Paul
There is only one reason Schwab and Fidelity are offering low-expense ratio funds. So ask yourself, do you want to reward the provider who is responsible for lower expense investments, or do you want to reward the provider who is offering low-expense ratio funds reluctantly, out of desperation?
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by ruralavalon »

topcatin wrote:
ruralavalon wrote:
topcatin wrote:I am in the process of moving very small amount ($680) from my eTRADE brokerage account to either Vanguard's brokerage or one at Schwabs.

Schwab's $1 minimum is great but their brokerage account minimum balance is $1000, so even though the total stock market fund has a $1 minimum, you will need $1000 to open a brokerage account :(.
Vanguard's trading fee on company stocks is $7.99 verses $4.95 at Schwab. Regardless, Schwab seems to be a better option to start off if one has less money to start worth.
Schwab is a good place to start for a new or young investor with a modest income and a relatively small amount to invest.

Do you have an IRA? In general it's better (because of the tax advantage) to start with an IRA rather than a taxable brokerage account.
Hi..yes I do have an IRA. I just wanted to set aside a small amount ($687 to be exact :) ) in a brokerage account and see if I can buy company stocks or a total stock market fund. I am ok with taking risks here and just test the markets and see if I can make some profit..I know this is wishful thinking and fully aware that picking company stocks is not encouraged here at bogleheads:).
Have you contributed the annual maximum $5.5k to your IRA? Have you also contributed the annual maximum $18k to your 401k or other work-based plan? Fully funding those accounts each year should ordinarily come first before using a taxable brokerage account.

Here is a general account funding priority that often works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, TSP) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA for each spouse, traditional or Roth, depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the 401ks; and
4) Contribute to a taxable investing account. Please see the wiki article "Prioritizing investments".

If you contribute to a taxable brokerage account be sure to use only very tax-efficient stock index funds, such as a total stock market index fund. Wiki article "Tax-efficient fund placement".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by NiceUnparticularMan »

munemaker wrote:
pkcrafter wrote:Schwab's move is motivated by the same thing as Fidelity, stop the outflow of $$ to Vanguard, even it it means operating at a small loss.

Paul
There is only one reason Schwab and Fidelity are offering low-expense ratio funds. So ask yourself, do you want to reward the provider who is responsible for lower expense investments, or do you want to reward the provider who is offering low-expense ratio funds reluctantly, out of desperation?
Isn't it important to provide the competitors with incentives to keep competing?
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by triceratop »

NiceUnparticularMan wrote:
munemaker wrote:
pkcrafter wrote:Schwab's move is motivated by the same thing as Fidelity, stop the outflow of $$ to Vanguard, even it it means operating at a small loss.

Paul
There is only one reason Schwab and Fidelity are offering low-expense ratio funds. So ask yourself, do you want to reward the provider who is responsible for lower expense investments, or do you want to reward the provider who is offering low-expense ratio funds reluctantly, out of desperation?
Isn't it important to provide the competitors with incentives to keep competing?
Not really, as long as Vanguard continues to compete with itself, which it should by design. Of course, if you mean subsidizing Schwab so that they continue to offer brokerage signup bonuses, then yes!
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by topcatin »

ruralavalon wrote:
topcatin wrote:
ruralavalon wrote:
topcatin wrote:I am in the process of moving very small amount ($680) from my eTRADE brokerage account to either Vanguard's brokerage or one at Schwabs.

Schwab's $1 minimum is great but their brokerage account minimum balance is $1000, so even though the total stock market fund has a $1 minimum, you will need $1000 to open a brokerage account :(.
Vanguard's trading fee on company stocks is $7.99 verses $4.95 at Schwab. Regardless, Schwab seems to be a better option to start off if one has less money to start worth.
Schwab is a good place to start for a new or young investor with a modest income and a relatively small amount to invest.

Do you have an IRA? In general it's better (because of the tax advantage) to start with an IRA rather than a taxable brokerage account.
Hi..yes I do have an IRA. I just wanted to set aside a small amount ($687 to be exact :) ) in a brokerage account and see if I can buy company stocks or a total stock market fund. I am ok with taking risks here and just test the markets and see if I can make some profit..I know this is wishful thinking and fully aware that picking company stocks is not encouraged here at bogleheads:).
Have you contributed the annual maximum $5.5k to your IRA? Have you also contributed the annual maximum $18k to your 401k or other work-based plan? Fully funding those accounts each year should ordinarily come first before using a taxable brokerage account.

Here is a general account funding priority that often works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, TSP) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA for each spouse, traditional or Roth, depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the 401ks; and
4) Contribute to a taxable investing account. Please see the wiki article "Prioritizing investments".

If you contribute to a taxable brokerage account be sure to use only very tax-efficient stock index funds, such as a total stock market index fund. Wiki article "Tax-efficient fund placement".
Agreed with all of this and trying to do it as well. This was an account I opened with eTRADE with "play" money to see how it will work. I am not going to invest on a monthly basis. I will just buy some stock and leave it. Probably cash it after some time if it makes a profit.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by greg24 »

If you have a Vanguard account, I would go with VTSMX.

If you have a Schwab account, I would go with their fund.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by David Jay »

topcatin wrote:Hi..yes I do have an IRA. I just wanted to set aside a small amount ($687 to be exact :) ) in a brokerage account and see if I can buy company stocks or a total stock market fund. I am ok with taking risks here and just test the markets and see if I can make some profit..I know this is wishful thinking and fully aware that picking company stocks is not encouraged here at bogleheads:).
An expense difference of 0.1% on a $687 balance is less than 69 cents a year. Keep it in Schwab for 6 years and the savings will buy a cup of coffee at Starbucks.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by ruralavalon »

David Jay wrote:
topcatin wrote:Hi..yes I do have an IRA. I just wanted to set aside a small amount ($687 to be exact :) ) in a brokerage account and see if I can buy company stocks or a total stock market fund. I am ok with taking risks here and just test the markets and see if I can make some profit..I know this is wishful thinking and fully aware that picking company stocks is not encouraged here at bogleheads:).
An expense difference of 0.1% on a $687 balance is less than 69 cents a year. Keep it in Schwab for 6 years and the savings will buy a cup of coffee at Starbucks.
That $4.14 after 6 years, that would be almost enough for 2 small coffees :!:
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by topcatin »

Definitely worth the wait for the coffee :sharebeer . Do any of you hold individual stocks? I was thinking of just getting 4 shares of aapl and leaving it.
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Re: VTSMX vs Schwab Total Stock Market Index Fund

Post by ruralavalon »

topcatin wrote:Definitely worth the wait for the coffee :sharebeer . Do any of you hold individual stocks? I was thinking of just getting 4 shares of aapl and leaving it.
We do not hold any individual stocks, the only fund that we have in our joint taxable account is Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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