Need Advice Regarding Where to Put Retirement Funds

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JMA304
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Joined: Thu Nov 08, 2018 12:02 pm

Need Advice Regarding Where to Put Retirement Funds

Post by JMA304 » Thu Nov 08, 2018 12:18 pm

I am new to the forum and have what I believe is a basic question. Through my employer, I have direct access to the Vanguard Institutional Index Fund Institutional Plus Shares [VIIIX] fund. I also have the ability to move funds to a private brokerage account where I can transfer funds into the Vanguard Total Stock Market Index Fund Admiral Shares [VTSAX]. The respective Expense Ratios for the funds are .02 [VIIIX] and .04 [VTSAX]. My question is, how similar are these two Vanguard funds? Specifically, I trying to determine whether it would be worth the effort to move the funds from [VIIIX] to [VTSAX]. I’m not sure if it makes a difference, but if it does, the amount invested is $2m. Any insights would be greatly appreciated.

magicrat
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Re: Need Advice Regarding Where to Put Retirement Funds

Post by magicrat » Thu Nov 08, 2018 12:58 pm

JMA304 wrote:
Thu Nov 08, 2018 12:18 pm
I am new to the forum and have what I believe is a basic question. Through my employer, I have direct access to the Vanguard Institutional Index Fund Institutional Plus Shares [VIIIX] fund. I also have the ability to move funds to a private brokerage account where I can transfer funds into the Vanguard Total Stock Market Index Fund Admiral Shares [VTSAX]. The respective Expense Ratios for the funds are .02 [VIIIX] and .04 [VTSAX]. My question is, how similar are these two Vanguard funds? Specifically, I trying to determine whether it would be worth the effort to move the funds from [VIIIX] to [VTSAX]. I’m not sure if it makes a difference, but if it does, the amount invested is $2m. Any insights would be greatly appreciated.
They are very similar. VIIIX tracks the S&P 500 and VTSAX tracks the total US stock market. VTSAX is slightly more diversified because it includes the S&P500 + all other US public companies (which are all smaller than those in the S&P 500). Their long-term returns are quite similar and you are fine in either one.

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Watty
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Re: Need Advice Regarding Where to Put Retirement Funds

Post by Watty » Thu Nov 08, 2018 2:42 pm

Here is an article about what John Bogle said about the choice a while back.

https://www.cbsnews.com/news/john-c-bog ... ck-market/


It is just me but one thing am not entirely comfortable with is how much weighting the S&P 500 gives to the largest companies like Apple, Microsoft, and Amazon which is about 10% of the S&P 500.

https://www.slickcharts.com/sp500

Just for diversification the total stock market fund would hold a bit less of those companies so I would use the total stock market index fund.

I am assuming that you also own an appropriate percent of bonds and international stocks.

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GerryL
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Re: Need Advice Regarding Where to Put Retirement Funds

Post by GerryL » Thu Nov 08, 2018 3:05 pm

Be sure to check about possible transaction fees if you opt to use the private brokerage account your company plan makes available. My company's last iteration of the 401k (before I retired) offered a number of core funds and the option of using a brokerage account (at Fidelity) to increase the number of funds available for people who wanted to be hands on.
I found the documentation about how it all worked to be unnecessarily complex and not very transparent. There were likely to be transaction fees for each purchase of non-Fidelity funds and it was unclear whether that would apply to each routine purchase triggered by payroll deductions. Going on the belief that when someone makes an explanation complex and non-transparent, they are trying to hide something, I opted to work with the list of core funds.

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Duckie
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Re: Need Advice Regarding Where to Put Retirement Funds

Post by Duckie » Thu Nov 08, 2018 6:21 pm

JMA304 wrote:Through my employer, I have direct access to the Vanguard Institutional Index Fund Institutional Plus Shares [VIIIX] fund.
Does your employer also offer an extended market fund? That would cover the missing 20% mid/small caps found in Total Stock.

JMA304
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Re: Need Advice Regarding Where to Put Retirement Funds

Post by JMA304 » Fri Nov 09, 2018 9:52 am

Watty wrote:
Thu Nov 08, 2018 2:42 pm
Here is an article about what John Bogle said about the choice a while back.

https://www.cbsnews.com/news/john-c-bog ... ck-market/


It is just me but one thing am not entirely comfortable with is how much weighting the S&P 500 gives to the largest companies like Apple, Microsoft, and Amazon which is about 10% of the S&P 500.

https://www.slickcharts.com/sp500

Just for diversification the total stock market fund would hold a bit less of those companies so I would use the total stock market index fund.

I am assuming that you also own an appropriate percent of bonds and international stocks.

Much Thanks for the link to the referenced article. Exactly what I was looking for.

JMA304
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Re: Need Advice Regarding Where to Put Retirement Funds

Post by JMA304 » Fri Nov 09, 2018 9:54 am

All, thanks for taking the time to reply to my post. Your advice was greatly appreciated.

Grt2bOutdoors
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Re: Need Advice Regarding Where to Put Retirement Funds

Post by Grt2bOutdoors » Fri Nov 09, 2018 5:45 pm

Over 90% of the return is captured by Institutional Index, but if that’s not good enough for you - Warren Buffett gives it his stamp of approval. I wouldn’t hesitate to just buy institutional index if it were the only choice in the plan.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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