Total Market Index or S&P500 index?

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Trobins44
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Total Market Index or S&P500 index?

Post by Trobins44 »

Want to do 20% small cap index, 20% REIT, 10% Bond. Should I do total market index Or S&P500 index as my core fund? Thanks
Daedalus
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Re: Total Market Index or S&P500 index?

Post by Daedalus »

I prefer total market, but that's just my opinion. Really can't go wrong with either one. They're both good funds with mimic the overall stock market similarly.
MJW
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Re: Total Market Index or S&P500 index?

Post by MJW »

Do you want your portfolio to be 20% small cap or something more? That should dictate which fund you use.

Also, bear in mind that actual small cap exposure will vary depending on the fund, with some having considerable exposure to midcap stocks as well.

Why so much REIT?
Last edited by MJW on Tue Dec 11, 2018 7:28 pm, edited 1 time in total.
RadAudit
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Re: Total Market Index or S&P500 index?

Post by RadAudit »

Welcome to the forum.

This is just a guess; but, I think that it would be easier to get the portfolio allocation you'd like using S&P as a core and then adding in the others as needed. Personally, I prefer the Total Stock Market for the diversification; but, I don't overweight.

Your choice.
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J G Bankerton
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Re: Total Market Index or S&P500 index?

Post by J G Bankerton »

Total stock pays less dividends than S&P if one wants less income.
YoungBogle
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Re: Total Market Index or S&P500 index?

Post by YoungBogle »

If I recall correctly, Vanguard recently eliminated the S&P 500 MF option in their employees 401k. Now only offers the total stock market in their 401k.. more diviersifcation for the same ER. If anyone had a good reason to go TSM, it would be VG and the likes of.. FWIW
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bluquark
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Re: Total Market Index or S&P500 index?

Post by bluquark »

Trobins44 wrote: Tue Dec 11, 2018 6:47 pm Want to do 20% small cap index, 20% REIT, 10% Bond. Should I do total market index Or S&P500 index as my core fund? Thanks
In my opinion if you're planning to maintain a fixed allocation to small-cap, going with S&P500 (or another large cap fund like VLACX) is cleaner and simpler than total market. The small cap proportion in total market will vary over time, and if you want to rigorous in rebalancing to your small cap allocation, you'd have to keep track of the latest breakdown.

(It would also be a valid strategy to choose not to be rigorous about the proportion and let it float with market cap, but in that case why hold Small Cap Index separately at all?)
70/30 portfolio | Equity: global market weight | Bonds: 20% long-term munis - 10% LEMB
samsdad
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Re: Total Market Index or S&P500 index?

Post by samsdad »

The 500 and small cap make up 2/3rds of my portfolio. Then there’s that other 1/3rd in something called midcap. . .
Bacchus01
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Re: Total Market Index or S&P500 index?

Post by Bacchus01 »

YoungBogle wrote: Tue Dec 11, 2018 7:31 pm If I recall correctly, Vanguard recently eliminated the S&P 500 MF option in their employees 401k. Now only offers the total stock market in their 401k.. more diviersifcation for the same ER. If anyone had a good reason to go TSM, it would be VG and the likes of.. FWIW
But these are my TLH partners. Gotta have both!
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bluquark
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Re: Total Market Index or S&P500 index?

Post by bluquark »

samsdad wrote: Tue Dec 11, 2018 8:41 pm The 500 and small cap make up 2/3rds of my portfolio. Then there’s that other 1/3rd in something called midcap. . .
Seems unnecessary unless you want a special midcap tilt. At least with Vanguard, their small cap index funds are completions of a corresponding large cap fund, so you own those companies anyway.
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Taylor Larimore
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Re: Total Market Index or S&P500 index?

Post by Taylor Larimore »

Trobins44 wrote: Tue Dec 11, 2018 6:47 pm Want to do 20% small cap index, 20% REIT, 10% Bond. Should I do total market index Or S&P 500 index as my core fund? Thanks
Trobins44:

Welcome to the Bogleheads Forum!

I prefer Vanguard Total Stock Market Index Fund for its one-fund simplicity and greater diversification. The market weights for small caps and REITs are also included in the Total Stock Market Index Fund.

Consider The Three-Fund Portfolio which uses Total Stock Index Market as its sole U.S. equity fund.

Use the "Simplicity" link below.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
samsdad
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Re: Total Market Index or S&P500 index?

Post by samsdad »

bluquark wrote: Tue Dec 11, 2018 9:31 pm
samsdad wrote: Tue Dec 11, 2018 8:41 pm The 500 and small cap make up 2/3rds of my portfolio. Then there’s that other 1/3rd in something called midcap. . .
Seems unnecessary unless you want a special midcap tilt. At least with Vanguard, their small cap index funds are completions of a corresponding large cap fund, so you own those companies anyway.
I’m 1/3rd each S&P500, 400, and 600. No overlap.
MotoTrojan
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Re: Total Market Index or S&P500 index?

Post by MotoTrojan »

If you have to ask, you should simplify your portfolio.
YoungBogle
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Re: Total Market Index or S&P500 index?

Post by YoungBogle »

Bacchus01 wrote: Tue Dec 11, 2018 8:53 pm
YoungBogle wrote: Tue Dec 11, 2018 7:31 pm If I recall correctly, Vanguard recently eliminated the S&P 500 MF option in their employees 401k. Now only offers the total stock market in their 401k.. more diviersifcation for the same ER. If anyone had a good reason to go TSM, it would be VG and the likes of.. FWIW
But these are my TLH partners. Gotta have both!
Hmmmm... tell me how TLH’ing in a 401k is working out for you! :sharebeer
sawhorse
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Re: Total Market Index or S&P500 index?

Post by sawhorse »

It doesn't really matter. The two have very similar long term results historically. Total market has been a little more volatile. It has higher potential upside but also higher potential downside. That seems counterintuitive since total market is more diversified, but it includes small caps which are more volatile than large caps. In fact, the Dow has over 0.96 correlation with the S&P with less volatility despite having 1/16th the number of stocks. That's because it only contains very large companies.
Bacchus01
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Re: Total Market Index or S&P500 index?

Post by Bacchus01 »

YoungBogle wrote: Tue Dec 11, 2018 10:12 pm
Bacchus01 wrote: Tue Dec 11, 2018 8:53 pm
YoungBogle wrote: Tue Dec 11, 2018 7:31 pm If I recall correctly, Vanguard recently eliminated the S&P 500 MF option in their employees 401k. Now only offers the total stock market in their 401k.. more diviersifcation for the same ER. If anyone had a good reason to go TSM, it would be VG and the likes of.. FWIW
But these are my TLH partners. Gotta have both!
Hmmmm... tell me how TLH’ing in a 401k is working out for you! :sharebeer
Touché. It was more a reflection on needing both in general. In a tax advantaged account, one or the other is fine.
alfaspider
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Re: Total Market Index or S&P500 index?

Post by alfaspider »

The two indexes are very strongly correlated, though I seem to recall that total market tends to have very slightly higher returns (at the cost of slightly higher volatility) due to including more smaller companies in the portfolio. As mentioned above, they are good to swap back and forth when you need to tax loss harvest.
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ruralavalon
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Re: Total Market Index or S&P500 index?

Post by ruralavalon »

Welcome to the forum :) .

Trobins44 wrote: Tue Dec 11, 2018 6:47 pm Want to do 20% small cap index, 20% REIT, 10% Bond. Should I do total market index Or S&P500 index as my core fund? Thanks
My preference is a total market index fund for the core domestic stock investment, because a little more diversified.

But an S&P 500 index fund will also serve the purpose.

The two types of funds have had almost identical performance.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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