Total Stock Index Fund vs SP 500
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Total Stock Index Fund vs SP 500
I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
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Re: Total Stock Index Fund vs SP 500
Yes it does.
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Re: Total Stock Index Fund vs SP 500
Yes.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
But how does anyone know that large companies will be down and mid and small companies will be up?
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Re: Total Stock Index Fund vs SP 500
ruralavalon wrote:Yes.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
But how does anyone know that large companies will be down and mid and small companies will be up?
very true just was wondering if that is another possibility.
Re: Total Stock Index Fund vs SP 500
1. Maybe. Maybe even probably. However it is path dependent. I doubt that we would see a smooth outperformance of small cap vs. large cap. For example, if the market had high volatility and was mean reverting then Total Stock would have lower preformance because of how it rebalances.
2. You may not even notice. The small cap portion of Total Stock is low so small cap would have to seriously outperform.
2. You may not even notice. The small cap portion of Total Stock is low so small cap would have to seriously outperform.
Re: Total Stock Index Fund vs SP 500
What is the Sharpe Ratio for each of these? Where do I find it?
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Re: Total Stock Index Fund vs SP 500
Total Stock Market doesn't need to rebalance except for index changes. Given that the question is about the CAGR of small caps vs. large caps, I think the answer is an unqualified "yes".alex_686 wrote:1. Maybe. Maybe even probably. However it is path dependent. I doubt that we would see a smooth outperformance of small cap vs. large cap. For example, if the market had high volatility and was mean reverting then Total Stock would have lower preformance because of how it rebalances.
2. You may not even notice. The small cap portion of Total Stock is low so small cap would have to seriously outperform.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: Total Stock Index Fund vs SP 500
It depends.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
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Finding the "Sharpe Ratio" of a fund.
tomander:tomander wrote:What is the Sharpe Ratio for each of these? Where do I find it?
Go to Morningstar, then put in the fund name or ticker symbol in the "Stock/fund" box at the top of every page. When the fund pops up, look for the light-grey bar across the top and hit "Ratings & Risk." Scroll down and you will find the Sharpe Ratio.
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: Total Stock Index Fund vs SP 500
As you say they are close. I switched between SP 500 & TSM for tax loss harvesting in 2008-9. When the music stopped in March 2009 I found myself in the SP 500 chair. Still there today. Would have preferred TSM, but it was not to be. At least I had a chair (did not sell).
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore
Re: Total Stock Index Fund vs SP 500
Thank you Taylor
Re: Total Stock Index Fund vs SP 500
since 2002 or so the total has done about .6 better-from vanguard website
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Re: Total Stock Index Fund vs SP 500
There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
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Re: Total Stock Index Fund vs SP 500
There is: you have maximum diversification with respect to the market: the so-called beta factor. Whether that shows up as an advantage against the SP500 over any arbitrary timeline is another matter.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: Total Stock Index Fund vs SP 500
Vanguard's TSM fund (VTSAX) is 73% Large-Cap, 18% Mid-Cap, and 9% Small-Cap. (Note that the S&P 500 itself is 13% mid-cap.)indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
Smaller-cap stocks tend to have higher risk and higher return. Over the long term, a TSM fund will have slightly higher returns and slightly higher volatility, compared to an S&P 500 fund. But the difference will be small, because the S&P 500 makes up about 80% of the TSM. TSM will also tend to have a slightly lower dividend yield.
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Re: Total Stock Index Fund vs SP 500
where did you get that break down of TSM.venkman wrote:Vanguard's TSM fund (VTSAX) is 73% Large-Cap, 18% Mid-Cap, and 9% Small-Cap. (Note that the S&P 500 itself is 13% mid-cap.)indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
Smaller-cap stocks tend to have higher risk and higher return. Over the long term, a TSM fund will have slightly higher returns and slightly higher volatility, compared to an S&P 500 fund. But the difference will be small, because the S&P 500 makes up about 80% of the TSM. TSM will also tend to have a slightly lower dividend yield.
Thank You
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Re: Total Stock Index Fund vs SP 500
With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
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Re: Total Stock Index Fund vs SP 500
Sure, and you can see it in action during the 2002 bear when small-cap outperformed.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
As always, in any market-weight index the effects of small-cap will be muted due their lesser market share. During that period, those with a significant tilt to small obviously saw a greater effect.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.
Re: Total Stock Index Fund vs SP 500
The real possibility of TSM outperformance over time is because of more mid and 9% small in TSM but it does take a long time to notice.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
http://www.nasdaq.com/article/heres-why ... 0-cm459910
Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Re: Total Stock Index Fund vs SP 500
This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
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Re: Total Stock Index Fund vs SP 500
That's part of it. But just to the right of that you see a Morningstar style box, consisting of 9 smaller boxes, which show the percentage of the fund which is invested in each of 9 categories.indexonlyplease wrote:This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
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Re: Total Stock Index Fund vs SP 500
That's fine if you want a market-weight fund. I have a slice-and-dice tilted portfolio, so total market funds just complicate things. I prefer more pure large or small cap funds, so I use S&P 500 for the bulk of my large blend allocation.ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.
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Re: Total Stock Index Fund vs SP 500
ruralavalon wrote:That's part of it. But just to the right of that you see a Morningstar style box, consisting of 9 smaller boxes, which show the percentage of the fund which is invested in each of 9 categories.indexonlyplease wrote:This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
Just found it. That really makes it easy to understand you have money in value, blend, growth in each sector.
So, I should use these numbers to match the total stock fund. Since my wife's 401k only offers 3 index of large, med, small. But then again keeping up with the balancing could be a pain? In stead of just all in the sp 500
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Re: Total Stock Index Fund vs SP 500
If a 401k, 403b or 457 plan offers a S&P 500 index fund but no total stock market index fund, then I suggest just using the S&P 500 Fund for domestic stocks.indexonlyplease wrote:ruralavalon wrote:That's part of it. But just to the right of that you see a Morningstar style box, consisting of 9 smaller boxes, which show the percentage of the fund which is invested in each of 9 categories.indexonlyplease wrote:This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
Just found it. That really makes it easy to understand you have money in value, blend, growth in each sector.
So, I should use these numbers to match the total stock fund. Since my wife's 401k only offers 3 index of large, med, small. But then again keeping up with the balancing could be a pain? In stead of just all in the sp 500
If she wants to mimic the content of the total stock market index fund see the wiki article "approximating total stock market" for the fund mix to use.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link:Getting Started
Re: Total Stock Index Fund vs SP 500
FWIW, here's a link to Morningstar chart showing the total return of the Wilshire 5000 Total Market vs. S&P 500 Total Return since 1970.
You can find individual time periods where it would have been slightly better to be in one over the other, but it's a small difference that unpredictably waxes and wanes, and over the longer term becomes increasingly insignificant (especially for someone whose money will be averaged in/out over long periods of time).
Picking between them or trying to find just the right balance is silly (IMO). I would say to go with whichever you'll feel better about with the conviction to stay the course. Some people will like the increased diversification in TSM over the 500, some people may like the idea of the mostly larger 'leading companies' in the S&P 500 that's is highly reported on and has lots of information reported on in the media.
You can find individual time periods where it would have been slightly better to be in one over the other, but it's a small difference that unpredictably waxes and wanes, and over the longer term becomes increasingly insignificant (especially for someone whose money will be averaged in/out over long periods of time).
Picking between them or trying to find just the right balance is silly (IMO). I would say to go with whichever you'll feel better about with the conviction to stay the course. Some people will like the increased diversification in TSM over the 500, some people may like the idea of the mostly larger 'leading companies' in the S&P 500 that's is highly reported on and has lots of information reported on in the media.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: Total Stock Index Fund vs SP 500
Indexonlyplease:So, I should use these numbers to match the total stock fund. Since my wife's 401k only offers 3 index of large, med, small. But then again keeping up with the balancing could be a pain? In stead of just all in the sp 500
There is no need to exactly match the Total Stock Market Fund if the alternate is trying to match it with a bunch of smaller funds. The S&P 500 Index fund in your wife's 401k is an excellent alternative to TSM because it holds the biggest and most successful companies in the USA. As shown above, their past returns have been almost the same. I doubt if adding more U.S. companies with their higher cost, less tax-efficiency and greater complexity is worth the bother.
Read my "Simplicity" link below.
Best wishes.
Taylor
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