Need help approximating total US market index fund

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RigaRoni
Posts: 3
Joined: Tue Jul 31, 2018 9:41 am

Need help approximating total US market index fund

Post by RigaRoni » Tue Jul 31, 2018 11:47 am

Hello. I am just starting to build my family portfolio with my new job's 403b and my wife's 401k plans. I am trying to do this with available options through our various employers. I am committed to index funding and want a 60/30/10 split between total US market/international market/bonds. My 403b uses Principal (ugh). My best available options are listed below.

PLFPX - LgCap S/P 500 Indx R5 Fund - ER 0.42
PMFPX - MidCap S/P 400 Indx R5 Fund - ER 0.42
PSSPX - SmCap S/P 600 Indx R5 Fund - ER 0.42

These ERs are ridiculous, and i'm trying to see if there is any other way i could have access to lower fee options, but this is probably what i'm going to have to work with. There are no international or bond index funds available through my employer, so i will have to build that through my wife's 401K. Anyway, I am unclear how to best proportion my investments to approximate the total US stock market index with these three available funds. I have looked at the tables provided at

https://www.bogleheads.org/wiki/Approxi ... t#Examples

But i'm unsure if these principal funds more represent the vanguard funds and i should be doing an 81/4/15 split or maybe the fidelity funds and so should be doing an 81/10/9 split. Granted, i'm realize i'm nitpicking here (in fact if i put it all in the large cap s/p 500 i doubt it would make a significant difference), but I cant help myself and wondered if anyone could give a reasonable starting point.

Secondly, I have the same question regarding my wife's options. Her employer goes through Fidelity (thankfully), so we will be utilizing FSPSX (Fidelity international index fund, ER 0.045) and Vanguard Inst Total Bond Mkt Indx Trust (ER 0.035) to build those components. But I have polish off the remainder of our US stock market index contribution with the following:

Vanguard Inst 500 Index Trust - ER 0.014
FSMAX - Fidelity Extended Mkt Indx Fund - ER 0.045

Using the table from the link above, if I extrapolate the corresponding vanguard funds, perhaps a 81/19 mix should reasonably capture the whole stock market. What do you guys think?

Thanks in advance, and apologize for the long post for a couple of relatively simple questions.

deltaneutral83
Posts: 866
Joined: Tue Mar 07, 2017 4:25 pm

Re: Need help approximating total US market index fund

Post by deltaneutral83 » Tue Jul 31, 2018 1:15 pm

RigaRoni wrote:
Tue Jul 31, 2018 11:47 am
These ERs are ridiculous
Not really, it could be worse.

80/20 large cap/small cap will approximate the TSM nicely. I don't mess with the mid caps as it's another layer when I like simplicity. You'll get it close with large/small as they each contain some mid.

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vineviz
Posts: 2005
Joined: Tue May 15, 2018 1:55 pm

Re: Need help approximating total US market index fund

Post by vineviz » Tue Jul 31, 2018 1:17 pm

RigaRoni wrote:
Tue Jul 31, 2018 11:47 am
Hello. I am just starting to build my family portfolio with my new job's 403b and my wife's 401k plans. I am trying to do this with available options through our various employers. I am committed to index funding and want a 60/30/10 split between total US market/international market/bonds. My 403b uses Principal (ugh). My best available options are listed below.

PLFPX - LgCap S/P 500 Indx R5 Fund - ER 0.42
PMFPX - MidCap S/P 400 Indx R5 Fund - ER 0.42
PSSPX - SmCap S/P 600 Indx R5 Fund - ER 0.42

These ERs are ridiculous, and i'm trying to see if there is any other way i could have access to lower fee options, but this is probably what i'm going to have to work with. There are no international or bond index funds available through my employer, so i will have to build that through my wife's 401K. Anyway, I am unclear how to best proportion my investments to approximate the total US stock market index with these three available funds. I have looked at the tables provided at

https://www.bogleheads.org/wiki/Approxi ... t#Examples

But i'm unsure if these principal funds more represent the vanguard funds and i should be doing an 81/4/15 split or maybe the fidelity funds and so should be doing an 81/10/9 split. Granted, i'm realize i'm nitpicking here (in fact if i put it all in the large cap s/p 500 i doubt it would make a significant difference), but I cant help myself and wondered if anyone could give a reasonable starting point.

Secondly, I have the same question regarding my wife's options. Her employer goes through Fidelity (thankfully), so we will be utilizing FSPSX (Fidelity international index fund, ER 0.045) and Vanguard Inst Total Bond Mkt Indx Trust (ER 0.035) to build those components. But I have polish off the remainder of our US stock market index contribution with the following:

Vanguard Inst 500 Index Trust - ER 0.014
FSMAX - Fidelity Extended Mkt Indx Fund - ER 0.045

Using the table from the link above, if I extrapolate the corresponding vanguard funds, perhaps a 81/19 mix should reasonably capture the whole stock market. What do you guys think?

Thanks in advance, and apologize for the long post for a couple of relatively simple questions.
Maybe you could list out the 5 or 10 CHEAPEST funds in your plan and we could brainstorm some ideas.

ExitStageLeft
Posts: 973
Joined: Sat Jan 20, 2018 4:02 pm

Re: Need help approximating total US market index fund

Post by ExitStageLeft » Tue Jul 31, 2018 1:30 pm

A 78/16/6 allocation of PLFPX/PMFPX/PSSPX would get you very close to the market weights of a total market fund like VTSAX. As noted above, an 80/0/20 allocation would get you almost as close and would likely be indistinguishable in performance.

https://www.portfoliovisualizer.com/bac ... ion4_2=100

RigaRoni
Posts: 3
Joined: Tue Jul 31, 2018 9:41 am

Re: Need help approximating total US market index fund

Post by RigaRoni » Tue Jul 31, 2018 2:13 pm

[/quote]
Maybe you could list out the 5 or 10 CHEAPEST funds in your plan and we could brainstorm some ideas.
[/quote]

Those three are by far the cheapest funds. The next cheapest ER is 0.90 and there are no other index funds available.

RigaRoni
Posts: 3
Joined: Tue Jul 31, 2018 9:41 am

Re: Need help approximating total US market index fund

Post by RigaRoni » Tue Jul 31, 2018 2:15 pm

ExitStageLeft wrote:
Tue Jul 31, 2018 1:30 pm
A 78/16/6 allocation of PLFPX/PMFPX/PSSPX would get you very close to the market weights of a total market fund like VTSAX. As noted above, an 80/0/20 allocation would get you almost as close and would likely be indistinguishable in performance.

https://www.portfoliovisualizer.com/bac ... ion4_2=100
That link was very helpful thank you! I think i will go with the simple 80/20 solution and exclude the MidCap fund.

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vineviz
Posts: 2005
Joined: Tue May 15, 2018 1:55 pm

Re: Need help approximating total US market index fund

Post by vineviz » Tue Jul 31, 2018 2:26 pm

RigaRoni wrote:
Tue Jul 31, 2018 2:13 pm
Those three are by far the cheapest funds. The next cheapest ER is 0.90 and there are no other index funds available.
Thanks for checking. You'd need to look at the plan documents to be sure, but I suspect that unlike most plans your administrative expenses are being paid in part or in full by the fund provider (Principal) instead of by your employer. It's possible that the stated ER reflects that, in which case the OVERALL expense of your 401k plan might not be as bad as it appears on the surface. Usually, those administrative expenses are hidden but in your case maybe they aren't.

As for tracking the market, there is no need to use all three funds: you can achieve near perfect replication using just two. The midcap fund will behave as linear combination of the other two, so you really only need to use the following:

Code: Select all

Ticker	Name	Allocation
PLFPX	Principal Large Cap S&P 500 Index R5	75.00%
PSSPX	Principal SmallCap S&P 600 Index R5	25.00%e]

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2018&lastMonth=12&endDate=07%2F30%2F2018&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&showYield=false&reinvestDividends=true&benchmark=-1&benchmarkSymbol=VTSMX&sameFees=true&symbol1=PLFPX&allocation1_1=75&symbol2=PMFPX&symbol3=PSSPX&allocation3_1=25
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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