Vanguard US Investment Options Minus Top 10?

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destin
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Vanguard US Investment Options Minus Top 10?

Post by destin » Thu Jan 18, 2018 4:35 pm

I have good confidence in the US economy. I have good confidence of US companies. I don't have confidence in the future of the following companies Microsoft, Alphabet, Facebook, maybe Apple. I have much stronger confidence in the companies below the top 10.

These companies make up a significant portion of the top 10 of many Vanguard Funds. I want to invest in the total US stock market minus these. What options are there for a Vanguard investor?

integrity
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Re: Vanguard US Investment Options Minus Top 10?

Post by integrity » Thu Jan 18, 2018 4:37 pm

Buy total stock market and short those stocks?

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badbreath
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Re: Vanguard US Investment Options Minus Top 10?

Post by badbreath » Thu Jan 18, 2018 7:59 pm

buy Mid Cap and Small cap funds
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jhfenton
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Re: Vanguard US Investment Options Minus Top 10?

Post by jhfenton » Thu Jan 18, 2018 9:58 pm

badbreath wrote:
Thu Jan 18, 2018 7:59 pm
buy Mid Cap and Small cap funds
+1 I own no large cap U.S. blend or growth funds, therefore I own none of those 10 stocks. Buy large value, mid value, small value, and international. Problem solved. (We don't even own any large-cap developed. Our international is all small and emerging markets.)

stan1
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Re: Vanguard US Investment Options Minus Top 10?

Post by stan1 » Thu Jan 18, 2018 10:03 pm

jhfenton wrote:
Thu Jan 18, 2018 9:58 pm
badbreath wrote:
Thu Jan 18, 2018 7:59 pm
buy Mid Cap and Small cap funds
+1 I own no large cap U.S. blend or growth funds, therefore I own none of those 10 stocks. Buy large value, mid value, small value, and international. Problem solved. (We don't even own any large-cap developed. Our international is all small and emerging markets.)
Only one little glitch: the top holding of Vanguard Large Cap Value is ... wait for it ... Microsoft!

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jhfenton
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Re: Vanguard US Investment Options Minus Top 10?

Post by jhfenton » Thu Jan 18, 2018 10:08 pm

stan1 wrote:
Thu Jan 18, 2018 10:03 pm
jhfenton wrote:
Thu Jan 18, 2018 9:58 pm
badbreath wrote:
Thu Jan 18, 2018 7:59 pm
buy Mid Cap and Small cap funds
+1 I own no large cap U.S. blend or growth funds, therefore I own none of those 10 stocks. Buy large value, mid value, small value, and international. Problem solved. (We don't even own any large-cap developed. Our international is all small and emerging markets.)
Only one little glitch: the top holding of Vanguard Large Cap Value is ... wait for it ... Microsoft!
You could buy Vanguard U.S. Value, an active fund at a reasonable 23 bp. :beer No FAANG or Microsoft. (Intel shows up as the 23rd holding at 0.82%.)

Apple shows up in some value funds too. AAPL is the largest holding in VLUE (iShares Edge MSCI USA Value Factor ETF), a sector neutral value fund.

venkman
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Re: Vanguard US Investment Options Minus Top 10?

Post by venkman » Thu Jan 18, 2018 10:28 pm

destin wrote:
Thu Jan 18, 2018 4:35 pm
These companies make up a significant portion of the top 10 of many Vanguard Funds. I want to invest in the total US stock market minus these. What options are there for a Vanguard investor?
The option most fitting with the BH philosophy is to remember that the reason index funds exist in the first place is that almost no one is good at predicting the performance of individual stocks, and just go with TSM. :happy

jocdoc
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Re: Vanguard US Investment Options Minus Top 10?

Post by jocdoc » Fri Jan 19, 2018 7:11 am

buy equal weight S&P 500 etf/fund

david1082b
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Re: Vanguard US Investment Options Minus Top 10?

Post by david1082b » Fri Jan 19, 2018 7:37 am

You could just buy the stocks you like outside the top 10?

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nisiprius
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Re: Vanguard US Investment Options Minus Top 10?

Post by nisiprius » Fri Jan 19, 2018 8:40 am

(Shrug) You have a specific personal opinion about four to ten specific stocks, which you think are dogs. The idea that there's something specially bad about the top ten isn't a popular theory, and I don't know of any Vanguard products that happen to be based on it. Vanguard has tools for implementing much vaguer, must less narrowly defined ideas, like basically investing in the whole market but providing a gentle "tilt" away from large growth, or large stocks generally. But I think as long as you are attached to specific opinions about a list of individual stocks, you won't find any Vanguard cake mixes that match them.
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IlliniDave
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Re: Vanguard US Investment Options Minus Top 10?

Post by IlliniDave » Fri Jan 19, 2018 9:08 am

It's the nature of the beast with cap weighted funds. The simplest thing if you're concerned about it is to tilt away by augmenting with funds that don't include Large Growth style box companies, though that wouldn't isolate the top ten companies. It would be sort of interesting to see how a hypothetical all-market-sans-the-top-right-corner index fund would have fared through the years. Not interesting enough that I'd set aside my fundamental laziness and pursue the answer though. Vanguard has index funds that cover all nine of the Morningstar-style style boxes, so a few decades worth of data should be available to mash together a surrogate.
Don't do something. Just stand there!

aristotelian
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Re: Vanguard US Investment Options Minus Top 10?

Post by aristotelian » Fri Jan 19, 2018 9:25 am

You could buy either an Equal Weight S&P index (which would include those stocks but at a much lower weight) or you can buy an ex-tech S&P ETF. I don't think Vanguard offers these but you could buy them using Vanguard platforms.

garlandwhizzer
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Re: Vanguard US Investment Options Minus Top 10?

Post by garlandwhizzer » Fri Jan 19, 2018 10:38 am

destin wrote:
I have good confidence in the US economy. I have good confidence of US companies. I don't have confidence in the future of the following companies Microsoft, Alphabet, Facebook, maybe Apple. I have much stronger confidence in the companies below the top 10.

These companies make up a significant portion of the top 10 of many Vanguard Funds. I want to invest in the total US stock market minus these. What options are there for a Vanguard investor?
Decades ago I believed I could pick which stocks were going to go up in the future and which were dogs. Experience taught me over the decades that I could not reliably outsmart the market when it came to setting stock prices. The Boglehead philosophy--buy a low cost index fund and forget about individual stock selection--eventually won out in my case. Individual stock picking or in the case of destin, shunning a few mega-cap stocks because they are strongly represented in an index, is IMHO unlikely to work on a consistent basis over a long time frame. Many of us start out picking only the good stocks and avoiding the bad ones. Most of those who take this outsmarting the market approach take a hard look at their results over time and realize that they're underperforming low cost indexes. Index investing seems less attractive to the novice investor than specific stock selection or stock shunning but the longer you play the investing game the better it looks. I believe that no one without exception knows reliably which stocks are going to outperform and which to underperform over any given future time frame.

Garland Whizzer

Whakamole
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Re: Vanguard US Investment Options Minus Top 10?

Post by Whakamole » Fri Jan 19, 2018 2:28 pm

There are FAANG etfs, you could buy the S&P/Total Market and short the ETF.

There is also SPXT, S&P 500 minus tech stocks - I think this is an interesting idea for those who have a lot of net worth tied up in tech companies (options, stock that would cause a very large tax bill if sold, etc.) Note it does hold Amazon - which I consider a tech company - but it's only 3%.

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Re: Vanguard US Investment Options Minus Top 10?

Post by bloom2708 » Fri Jan 19, 2018 2:30 pm

Start back at the Getting Started wiki.

You should stop yourself if you think or say or feel "I don't have confidence in these x,y,z companies..."

Hard stop.

Nobody Knows Nothing (NKN)
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

destin
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Re: Vanguard US Investment Options Minus Top 10?

Post by destin » Fri Jan 19, 2018 2:40 pm

Thank you everyone for these ideas.

Completely eliminating the companies I don't want is going to be very hard in index funds but if I can limit my holding of them, that would be great.

Manually buying every stock I want would be nice but my expense ratio would skyrocket as well as all the time needed managing hundreds of stocks would be too much.

Is there a way to short efficiently with Vanguard? Don't short ETFs tend of have very high expense ratios?

I view stocks as real living breathing businesses. I just can't turn investing into a religion.

Agggm
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Re: Vanguard US Investment Options Minus Top 10?

Post by Agggm » Fri Jan 19, 2018 3:00 pm

destin wrote:
Thu Jan 18, 2018 4:35 pm
I have good confidence in the US economy. I have good confidence of US companies. I don't have confidence in the future of the following companies Microsoft, Alphabet, Facebook, maybe Apple. I have much stronger confidence in the companies below the top 10.

These companies make up a significant portion of the top 10 of many Vanguard Funds. I want to invest in the total US stock market minus these. What options are there for a Vanguard investor?
What would Jack do?

If you're solvent and sophisticated enough to maintain a long term short position on FAANG, go for it. Keep us posted.

selters
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Re: Vanguard US Investment Options Minus Top 10?

Post by selters » Fri Jan 19, 2018 3:00 pm

integrity wrote:
Thu Jan 18, 2018 4:37 pm
Buy total stock market and short those stocks?
Is that really a good suggestion, even we if accept the premise that total stock market minus top 10 will outperform the top 10 significantly over the next 1, 3, 5, 10, 20 years? There's a huge difference between expecting one group of stocks to underperform and expecting them to produce a negative return.

selters
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Re: Vanguard US Investment Options Minus Top 10?

Post by selters » Fri Jan 19, 2018 3:41 pm

badbreath wrote:
Thu Jan 18, 2018 7:59 pm
buy Mid Cap and Small cap funds
That's probably the most cost effective way of doing it. If you buy Vanguard Mid Cap and Vanguard Small Cap, you don't own total stock market minus 10, but more like total stock market minus 200, but that should be very close in performance.

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nisiprius
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Re: Vanguard US Investment Options Minus Top 10?

Post by nisiprius » Fri Jan 19, 2018 4:41 pm

destin wrote:
Fri Jan 19, 2018 2:40 pm
...Don't short ETFs tend of have very high expense ratios?...
It's worse than that. It's much, much, much worse than that. Inverse and leveraged ETFs are evil. They don't do what many investors think they do. They are completely unsuitable for any kind of long-term or buy-and-hold investing. They do exactly what they say they will do, but the practical effect of doing what they say isn't obvious. See Inverse and leveraged ETFs for a discussion including illustrations of how, during a period of time when the S&P 500 lost money, a 2X S&P short fund also lost money.
I view stocks as real living breathing businesses. I just can't turn investing into a religion.
It is exactly because I view stocks as real living businesses that I index. I can't assess the health of a business any more than, not being a doctor, I can assess the health of a living body.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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sunnywindy
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Re: Vanguard US Investment Options Minus Top 10?

Post by sunnywindy » Fri Jan 19, 2018 6:26 pm

There's a new ETF that is the inverse of the S&P500 which means that Apple, Facebook, etc... are the smallest holdings and not the largest - the weighting is reversed. Exponential Reverse Cap Weighted US Large Cap ETF (RVRS) http://exponentialetfs.com/reverse-cap-weighting/
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