Approximate Total Stock Market - 457b PDSIX and DISSX

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Topic Author
schleprock117
Posts: 34
Joined: Sun Jan 28, 2018 5:11 pm

Approximate Total Stock Market - 457b PDSIX and DISSX

Post by schleprock117 » Fri Sep 27, 2019 1:02 pm

Hi all,

Just want to get some clarification since this is the first time my DW and I are opening her 457b. We want to do 80% PDSIX and 20% DISSX in her 457b. Will this mix approximate Total Stock Market? We want to have 100% US stocks in her 457b. I looked at Portfolio Visualizer, and this mix seemed to track VTSAX close enough. Just afraid i'm missing some mid-cap.

We also plan to increase our bonds and international in my 401k since my DW has high ERs. Our available funds are listed below.

DW 457b Available Funds
Western Asset Core Plus Bond I WACPX (0.52)
Dreyfus Bond Market Index Inv DBMIX (0.41)
Eaton Vance Income Fund of Boston A EVIBX (0.99)
PIMCO Real Return A PRTNX (1.28)
American Funds American Balanced R3 RLBCX (0.93)
American Beacon Bridgeway Lg Cp Val Inst BRLVX (0.72)
Invesco Diversified Dividend Y LCEYX (0.57)
PGIM QMA Large-Cap Core Equity Z PTEZX (0.56)
PGIM QMA Stock Index I PDSIX (0.25)
Alger Capital Appreciation Instl I ALARX (1.15)
Calvert US Large Cap Core Rspnb Idx A CSXAX (0.62)
PGIM Jennison Growth Z PJFZX (0.71)
Wells Fargo Special Mid Cap Value A WFPAX (1.16)
Ariel Appreciation Investor CAAPX (1.13)
Dreyfus Mid Cap Index Inv PESPX (0.51)
PGIM Jennison Mid-Cap Growth Z PEGZX (0.8)
Nuveen Small Cap Value I FSCCX (0.99)
Dreyfus Small Cap Stock Index Inv DISSX (0.51)
JPMorgan Small Cap Equity A VSEAX (1.27)
T. Rowe Price QM US Small-Cap Gr Eq PRDSX (0.79)
Seven Canyons World Innovators Investor WAGTX (1.95)
Domini Impact International Equity Inv DOMIX (1.41)
Dreyfus International Stock Index Inv DIISX (0.61)
American Funds Europacific Growth R3 RERCX (1.13)
Franklin Mutual European A TEMIX (1.29)
Oppenheimer Developing Markets A ODMAX (1.29)
BlackRock Health Sciences Opps Inv A SHSAX (1.15)
PIMCO Real Estate Real Return Strategy A PETAX (1.66)

DH 401k Available Funds
RSP LARGE STK INDEX (0.013)
RSP TOTAL US STK IND (0.017)
RSP SMALL STK INDEX (0.032)
RSP WORLD STOCK INDX (0.05)
RSP EMERGING MARKET (0.7)
RSP INT'L STK INDEX (0.055)
RSP BOND INDEX (0.027)
RSP US GOV BOND INDX (0.017)
RSP SHORT TERM BOND (0.02)
RSP MONEY MARKET (0.05)

deltaneutral83
Posts: 1263
Joined: Tue Mar 07, 2017 4:25 pm

Re: Approximate Total Stock Market - 457b PDSIX and DISSX

Post by deltaneutral83 » Fri Sep 27, 2019 1:47 pm

You can look at it more of as a total portfolio between the two of you and load up on the S&P fund in hers and balance out in yours. Her small cap ER is 51 bps and yours is between 3 and 4. No need to get in the weeds and have every account match the overall portfolio AA. She goes 100% in the S&P, you go 90% TSM and 10% Small caps. Gets you very close to an overall allocation to the TSM for the lowest available ER.

targetconfusion
Posts: 46
Joined: Sun Aug 12, 2018 1:02 pm

Re: Approximate Total Stock Market - 457b PDSIX and DISSX

Post by targetconfusion » Fri Sep 27, 2019 1:53 pm

Those expense ratios aren't doing her many favors! In her position, (without having run numbers) I'd lean toward 100% PDSIX and follow your plan to grab other desired allocation outside the plan. It's never fun forgoing mid- and small-cap, but it's also not fun paying high expense ratios and large cap is (roughly and variably) 80% correlated to the overall market.

Topic Author
schleprock117
Posts: 34
Joined: Sun Jan 28, 2018 5:11 pm

Re: Approximate Total Stock Market - 457b PDSIX and DISSX

Post by schleprock117 » Fri Sep 27, 2019 2:46 pm

She goes 100% in the S&P, you go 90% TSM and 10% Small caps. Gets you very close to an overall allocation to the TSM for the lowest available ER.
I should only go 10%, not 20%? The RSP Small Stock index in my 401k is a Morningstar Mid-Cap blend that indexes the Russell Small Cap Completeness Index. Does this mean it's a small-cap fund?

BruinBones
Posts: 35
Joined: Sun Apr 22, 2018 5:39 pm

Re: Approximate Total Stock Market - 457b PDSIX and DISSX

Post by BruinBones » Mon Sep 30, 2019 2:07 pm

targetconfusion wrote:
Fri Sep 27, 2019 1:53 pm
Those expense ratios aren't doing her many favors! In her position, (without having run numbers) I'd lean toward 100% PDSIX and follow your plan to grab other desired allocation outside the plan. It's never fun forgoing mid- and small-cap, but it's also not fun paying high expense ratios and large cap is (roughly and variably) 80% correlated to the overall market.
+1, regarding allocation due to expense ratio and regarding correlation

deltaneutral83
Posts: 1263
Joined: Tue Mar 07, 2017 4:25 pm

Re: Approximate Total Stock Market - 457b PDSIX and DISSX

Post by deltaneutral83 » Mon Sep 30, 2019 2:23 pm

schleprock117 wrote:
Fri Sep 27, 2019 2:46 pm
She goes 100% in the S&P, you go 90% TSM and 10% Small caps. Gets you very close to an overall allocation to the TSM for the lowest available ER.
I should only go 10%, not 20%? The RSP Small Stock index in my 401k is a Morningstar Mid-Cap blend that indexes the Russell Small Cap Completeness Index. Does this mean it's a small-cap fund?
It probably doesn't matter, the key point is to go 100% S&P (PDSIX) in your spouse's because of the nasty ER's on the other funds and build around that in yours where you have the nice low ER's to get to your total AA.

Topic Author
schleprock117
Posts: 34
Joined: Sun Jan 28, 2018 5:11 pm

Re: Approximate Total Stock Market - 457b PDSIX and DISSX

Post by schleprock117 » Mon Oct 07, 2019 4:46 pm

Thank you, sir.

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ruralavalon
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Re: Approximate Total Stock Market - 457b PDSIX and DISSX

Post by ruralavalon » Wed Oct 09, 2019 2:48 pm

schleprock117 wrote:
Fri Sep 27, 2019 1:02 pm
Hi all,

Just want to get some clarification since this is the first time my DW and I are opening her 457b. We want to do 80% PDSIX and 20% DISSX in her 457b. Will this mix approximate Total Stock Market? We want to have 100% US stocks in her 457b. I looked at Portfolio Visualizer, and this mix seemed to track VTSAX close enough. Just afraid i'm missing some mid-cap.
PGIM QMA Stock Index I PDSIX (0.25) tracks the S&P 500 index, which covers 82% of the U.S.stock market. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

In my opinion in a plan that lacks a total stock market index fund, a S&P 500 index fund (such as PGIM QMA Stock Index I PDSIX in your 401k) is good enough by itself for a domestic stock allocation. A S&P 500 index fund covers 82% of the U.S. stock market, investing in stocks of selected large-cap and mid-cap U.S. companies. In the 27 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph (1992 – 2019), VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the they have been about the same (on a $10,000 investment the difference was $13 a year), and over the 27 years the total market fund gave a little more return. So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

See also:
1) Allan Roth, CBS Moneywatch (02/03/2010), "John C. Bogle on the S&P 500 vs. the Total Stock Market"; and
2) Wall Street Physician (01/17/2019), "Should You Invest in the S&P 500 or the Total Stock Market?".

If you want to add Dreyfus Small Cap Stock Index Inv DISSX (0.51), then an 82/18 mix of the S&P 500 and small-cap funds will approximate the content of a total stock market index fund. Wiki article, "Approximating total stock market". In my opinion this is not necessary, it is optional if you prefer to do this.

Because the S&P 500 and small-cap funds both include some mid-caps, you will not be missing out on mid-caps.

. . . . .

In his 401k plan, what does "RSP" refer to? What are the ticker symbols for those funds?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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