Total Stock Index Fund vs SP 500

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indexonlyplease
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Total Stock Index Fund vs SP 500

Postby indexonlyplease » Sun Jul 16, 2017 1:02 pm

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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whodidntante
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Re: Total Stock Index Fund vs SP 500

Postby whodidntante » Sun Jul 16, 2017 1:04 pm

Yes it does.

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ruralavalon
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Re: Total Stock Index Fund vs SP 500

Postby ruralavalon » Sun Jul 16, 2017 1:13 pm

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????

Yes.

But how does anyone know that large companies will be down and mid and small companies will be up?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

indexonlyplease
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Re: Total Stock Index Fund vs SP 500

Postby indexonlyplease » Sun Jul 16, 2017 3:52 pm

ruralavalon wrote:
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????

Yes.

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.

alex_686
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Re: Total Stock Index Fund vs SP 500

Postby alex_686 » Sun Jul 16, 2017 4:08 pm

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.

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tomander
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Re: Total Stock Index Fund vs SP 500

Postby tomander » Sun Jul 16, 2017 4:10 pm

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

Postby triceratop » Sun Jul 16, 2017 4:14 pm

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.


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".
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Re: Total Stock Index Fund vs SP 500

Postby mickeyd » Sun Jul 16, 2017 4:18 pm

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????


It depends.
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Finding the "Sharpe Ratio" of a fund.

Postby Taylor Larimore » Sun Jul 16, 2017 4:44 pm

tomander wrote:What is the Sharpe Ratio for each of these? Where do I find it?

tomander:

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
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Re: Total Stock Index Fund vs SP 500

Postby Leif » Sun Jul 16, 2017 6:07 pm

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

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tomander
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Re: Total Stock Index Fund vs SP 500

Postby tomander » Sun Jul 16, 2017 7:16 pm

Thank you Taylor

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Re: Total Stock Index Fund vs SP 500

Postby Kennyt7 » Sun Jul 16, 2017 7:27 pm

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

Postby indexonlyplease » Sun Jul 16, 2017 7:28 pm

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.

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Re: Total Stock Index Fund vs SP 500

Postby triceratop » Sun Jul 16, 2017 7:32 pm

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.


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.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Total Stock Index Fund vs SP 500

Postby venkman » Mon Jul 17, 2017 12:22 am

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.


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.)

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

Postby indexonlyplease » Mon Jul 17, 2017 6:05 am

venkman wrote:
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.


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.)

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.


where did you get that break down of TSM.

Thank You

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Re: Total Stock Index Fund vs SP 500

Postby ruralavalon » Mon Jul 17, 2017 10:19 am

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.

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.

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

Postby Earl Lemongrab » Mon Jul 17, 2017 4:15 pm

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????

Sure, and you can see it in action during the 2002 bear when small-cap outperformed.

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.
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Re: Total Stock Index Fund vs SP 500

Postby pkcrafter » Mon Jul 17, 2017 4:40 pm

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????


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.

http://www.nasdaq.com/article/heres-why ... 0-cm459910



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Re: Total Stock Index Fund vs SP 500

Postby indexonlyplease » Tue Jul 18, 2017 9:36 am

ruralavalon wrote:
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.

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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.


This is what I am looking for??
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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ruralavalon
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Re: Total Stock Index Fund vs SP 500

Postby ruralavalon » Tue Jul 18, 2017 10:06 am

indexonlyplease wrote:
ruralavalon wrote:
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.

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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.


This is what I am looking for??
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

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.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | | Wiki article link:Getting Started

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Earl Lemongrab
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Re: Total Stock Index Fund vs SP 500

Postby Earl Lemongrab » Tue Jul 18, 2017 10:13 am

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.

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.
This week's fortune cookie: "You will enjoy doing something spontaneous this weekend." Apparently that meant working on a dead PC, but I didn't enjoy that much.

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Re: Total Stock Index Fund vs SP 500

Postby indexonlyplease » Tue Jul 18, 2017 10:14 am

ruralavalon wrote:
indexonlyplease wrote:
ruralavalon wrote:
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.

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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.


This is what I am looking for??
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

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.



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

Postby ruralavalon » Tue Jul 18, 2017 10:44 am

indexonlyplease wrote:
ruralavalon wrote:
indexonlyplease wrote:
ruralavalon wrote:
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.

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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.


This is what I am looking for??
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

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.



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 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.

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

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JoMoney
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Re: Total Stock Index Fund vs SP 500

Postby JoMoney » Tue Jul 18, 2017 11:12 am

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.
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Taylor Larimore
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Re: Total Stock Index Fund vs SP 500

Postby Taylor Larimore » Tue Jul 18, 2017 12:05 pm

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

Indexonlyplease:

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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