Vanguard Total Market and Growth Funds

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DarNoor
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Vanguard Total Market and Growth Funds

Post by DarNoor » Tue Aug 13, 2019 6:55 am

Hi everyone,

I own both the Vanguard Total Market fund and their Growth fund. My question is, is the growth fund redundant? They both have just about the same top 10 holdings. The only difference is the allocation percentages. So, my question is, do they overlap since they are both top heavy with the same stocks? Should i just choose one and have a small percentage of the other? I really enjoy the site. Thanks for the help.

bloom2708
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Re: Vanguard Total Market and Growth Funds

Post by bloom2708 » Tue Aug 13, 2019 9:19 am

Total Market is "all" US stocks at market cap weight.

Growth is a selected subsection of Total Market at different weights.

So, yes, you have all overlap. Likely tilting more to large cap.

Do you have an allocation to Total International? Total US + Total International gives you good mix at cap weights.

Common tilts (on top of the Total Market) are Small Cap Value, Emerging Markets, REIT.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

dbr
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Re: Vanguard Total Market and Growth Funds

Post by dbr » Tue Aug 13, 2019 12:52 pm

As above, they overlap.

Should you invest mainly in the market and then add a concentration to part of the market? That is called tilting.

However, the subject is much discussed. Usually the idea is to tilt to value rather than growth. Here are past discussions: https://www.google.com/search?sitesearc ... &q=tilting

The original theory underlying these ideas can be found here: https://www.investopedia.com/terms/f/fa ... rmodel.asp

and a book on the subject from a broad perspective is here: https://www.amazon.com/Your-Complete-Gu ... ay&sr=8-11

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nisiprius
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Re: Vanguard Total Market and Growth Funds

Post by nisiprius » Tue Aug 13, 2019 1:24 pm

There's no particular harm in overlap, in a case like this. All that it means in this case is that you have a tilt to large-cap growth. If you were invested entirely in Total Market, you would have no tilt. You are half invested in Growth Index, so you have some growth tilt. If you were invested entirely in Vanguard Growth Index you would have more of a tilt.

If you had a clear reason why you wanted to tilt toward large-cap growth, but not as far as Vanguard Growth Index, this would be a perfectly reasonable way to do it. I don't think you have that reason, though; if you do, you haven't mentioned it yet.

One reason why people tell you to be concerned about overlap is that it matter if you believe in active management and are invested in several actively managed funds with high expense ratios. The reason for paying those high expense ratios is your belief in the choices the fund manager makes. If you hold several overlapping funds, then you are mixing up the different choices of several different fund managers, so your overall portfolio is starting to become more and more like the total market--in other words, you are paying high expense ratios to get something you could do better and at lower cost with an index fund.

In reality, there has been surprisingly little difference in the behavior of your two funds. Portfolio 1 is Total Stock; Portfolio 2 is Growth Index; and Portfolio 3 is a 50/50 mix, and, as expected, is somewhere in between the other two.

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It doesn't sound as if you have any very clear reason for including the Vanguard Growth Index fund, so it might just be cluttering your portfolio.

Do not fall into the trap of assuming you know what is really meant by phrases like "growth stocks" and "growth index" without reading up on it a bit. Obviously everyone would like their money to grow as fast as possible. If "growth stocks" just grew faster, without any other tradeoffs, nobody would buy anything else.
Last edited by nisiprius on Tue Aug 13, 2019 2:36 pm, edited 1 time in total.
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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Taylor Larimore
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Re: Vanguard Total Market and Growth Funds

Post by Taylor Larimore » Tue Aug 13, 2019 1:58 pm

DarNoor wrote:
Tue Aug 13, 2019 6:55 am
Hi everyone,

I own both the Vanguard Total Market fund and their Growth fund. My question is, is the growth fund redundant? They both have just about the same top 10 holdings. The only difference is the allocation percentages. So, my question is, do they overlap since they are both top heavy with the same stocks? Should i just choose one and have a small percentage of the other? I really enjoy the site. Thanks for the help.
DarNoor:

Welcome to the Bogleheads Forum!

A little while ago I made a post which I think will answer your question:

viewtopic.php?f=10&t=288085&newpost=469 ... ead#unread

Be sure to read my link below.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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