S&P 500 v Total Stock - What is your favorite and why?

[abuss368]

Bogleheads -

I know over the long term the return difference is a rounding error. The risks is essentially the same.

What is your preference and why between Total Stock and S&P 500?

Tony

[000]

Total Stock of course. I don't trust other people to pick stocks and market time for me - I can do that myself.

[TomatoTomahto]

Total Stock. I didn’t mind owning Tesla before it got into S&P 500.

[txhill]

I went with the S&P 500 instead of Total Stock only because I believe that generally speaking, the rich get richer, and the S&P 500 adequately self-corrects for business successes and failures. But I think it just comes down to preference and doesn't matter much.

[Marseille07]

S&P 500. When the Sage of Omaha tilts toward S&P 500, I simply follow his advice.

[YRT70]

Total stock. I like the extra mid and small caps.

[ivgrivchuck]

What is your preference and why between Total Stock and S&P 500?

Total Stock.

- It's the simplest to own the whole market.
- I don't like that a committee decides on the stocks I invest in.

[2pedals]

The total stock market index because Jack Bogle introduced something very special beyond the S&P 500 index.

[abuss368]

The total stock market index because Jack Bogle introduced something very special beyond the S&P 500 index.

Jack Bogle introduced both of these funds! In fact, the S&P 500 funds was the first Vanguard index fund launch by Mr. Bogle. The “First Index Investment Trust” was designed to match the performance of the S&P 500. The fund was referred to as “Bogle’s Folly”.

Tony

[abuss368]

Total Stock. I didn’t mind owning Tesla before it got into S&P 500.

Excellent point. And no potential capital gains impact from removing another company if you invested in an S&P 500 fund.

Tony

[Quaestner]

Total Stock. I didn’t mind owning Tesla before it got into S&P 500.

I agree with this. What's so special about the S&P?

Owning Total Stock expresses my conviction that I know nothing - that I'm not betting that large cap is necessarily the best way to invest. If you go Total Stock, for the same expense ratio as S&P, you get the whole US market (including a bit of small cap). Maybe that's why, since 11/13/2000, it's outperformed the S&P 500 by over .5% per year - not a rounding error to me! (That stat is for the Vanguard mutual fund versions).

[RadAudit]

Of the two, total stock. I like the extra diversification of total stock.

For my portfolio, I like total world stock for new money in to a (very slightly) rising equity glidepath. It keeps the world wide diversification that I want in my portfolio. Now, if you ask why do you give up several % points in performance to go to total world stock from total stock, I don't know if I have a real good answer for that (other than diversification).

[Seasonal]

Total stock for diversification and being more passive.

S&P 500 may be a bit more tax efficient.

As noted, over time the difference is rounding error.

[Dave55]

Total stock is my favorite. Tax cost ratio is slightly lower (according to data on Fidelity) for Total stock ETF (VTI) than VOO Vanguard 500 ETF and I like having midcap and small cap at market weight included. I also own VV Vanguard Large Cap in taxable due to Tax Loss harvest.

Dave

[dru808]

S&P 1500, total stock with a s&p twist.

[Mike Scott]

It apparently does not make a lot of difference in outcomes but I do like the idea of total stock being more diverse.

[watchnerd]

Bogleheads -

I know over the long term the return difference is a rounding error. The risks is essentially the same.

What is your preference and why between Total Stock and S&P 500?

Tony

VT/VTWAX

The *real* total stock.

And I add a dash of FM just to take it to 11.

[JediMisty]

I have S&P 500 in my taxable account and Total Stock in my IRA and Roth IRA. My 401k has a low ER S&P 500 institutional fund. This allows me to buy and sell to rebalance and to Tax Loss Harvest, if the occasion arises. I'm just before retirement. As I tax gain harvest and otherwise use up my taxable accounts, this will shrink to fewer funds. I'll rollover my 401k after retirement.

[Triple digit golfer]

I don't really care much, but Total Stock because the less human decision making, the better, and it includes more companies.

[nisiprius]

I prefer Total Stock because it is slightly more faithful to my original goal.

My original goal was to hold the whole market, because I didn't believe I could pick stocks that would outperform the market. Even the total market is pretty risky by my standards, but I thought averaging over the whole market would avoid adding "manager risk" on top.

When the S&P 500 was created in 1957, the goal was clearly to measure the whole market, subject to the limitations of the time. Previously there had been a 90-stock composite index. In 1957 500 stocks was as many as they could track with available computers, and still be able to recalculate at one-hour intervals. Within the restriction of a five-hundred-stock maximum, they had to choose something. The discovery of the (dubious?) small-firm effect was more than two decades in the future, and it wasn't usual to think of small-caps as desirable in themselves. They chose five hundred "leading companies in leading industries," likely because the credibility of the index might depend on investors finding their own choices within it. It included 90% of the market by cap weight when it was created.

Because the S&P 500 is different from the total market, it instantly factionalizes the world into those who think it's better and those who think it's worse. But it was just a 1957 workmanlike effort at indexing the total market. People are creating backstories in which S&P is trying to select superior stocks by requiring however many quarters of profitability, etc. but really that's after the fact. They were just trying to index as much of the market as they could.

I thought of the S&P 500 as "the market." I think most people did. I didn't invest in the S&P 500 because I thought it was an actively curated collection of outperformers, I just thought of it as the market. I was aware of the Wilshire 5000 in a hazy way, mostly as a curiosity. I think Total Stock actually did index the Wilshire 5000 in the earliest days. Anyway, when I became aware that I could literally get the total market with no effort and at no extra expense over the S&P 500, in a tax-advantaged account, I switched.

Why stick with something that was just close enough to what had I wanted in the first place, when I could get exactly what I had wanted in the first place?

[Bayliss]

I do VTI Total Stock Market because I really don't want to mess with small cap. I just wish I had done Total Stock Market a long time ago. Unfortunately, it wasn't an option for me but it is now with all the fees and expenses being dropped to nil the last few years.

[neurosphere]

If the Total Stock market index fund had been available first, for whatever reason, we likely wouldn't be having this discussion. E.g. who would say "wait! we've got a great thing going, but howboutwe lop off the bottom 10-20% of the market and say, pick the biggest 500 companies (because 500 is a nice round number), and well, now THAT's an index to be proud of! That's gonna be my core equity fund!"

Or to continue the analogy: Which do you prefer, the SP500 or the Mega Cap index, and why?

[WarAdmiral]

Bogleheads -

I know over the long term the return difference is a rounding error. The risks is essentially the same.

What is your preference and why between Total Stock and S&P 500?

Tony

S&P 500. Why carry the baggage of extra 3000 stocks which make up just 15% of its total value ?

[nisiprius]

If the Total Stock market index fund had been available first, for whatever reason, we likely wouldn't be having this discussion. E.g. who would say "wait! we've got a great thing going, but howboutwe lop off the bottom 10-20% of the market and say, pick the biggest 500 companies (because 500 is a nice round number), and well, now THAT's an index to be proud of! That's gonna be my core equity fund!"

Or to continue the analogy: Which do you prefer, the SP500 or the Mega Cap index, and why?

Nice!

Recently someone posted a link to a blog post by someone at Schwab. The writer attacked the S&P 500 index, and used that as an argument for preferring the Schwab 1000 index over the S&P 500. Every one of his arguments also was an argument for preferring the Schwab Total Stock Market Index Fund over the Schwab 1000.

[nisiprius]

What is your preference and why between Total Stock and S&P 500?

S&P 500. Why carry the baggage of extra 3000 stocks which make up just 15% of its total value ?

So as not to have to fuss when one of those 3000 turns out to be Tesla. By the time everyone was fretting about the earthshaking things that were going to happen when Tesla was added to the S&P 500 on December 21st, 2020, I had been holding it in Total Stock for ten years.

[3000]

S&P 500 FXAIX in Roth IRA and Total Stock VTI in Taxable. I had heard about the S&P 500 funds and decided to go with it. When I opened my taxable I decided to keep the funds different. Been happy with both.

[WarAdmiral]

What is your preference and why between Total Stock and S&P 500?

S&P 500. Why carry the baggage of extra 3000 stocks which make up just 15% of its total value ?

So as not to have to fuss when one of those 3000 turns out to be Tesla. By the time everyone was fretting about the earthshaking things that were going to happen when Tesla was added to the S&P 500 on December 21st, 2020, I had been holding it in Total Stock for ten years.

The Next Tesla will automatically get added at some point to S&P 500 once it gets big enough. Did this addition of Tesla make any significant difference ? No. The next one won't either.

[NAVigator]

Total Stock.

To extend Bogle's metaphor, why own part of the haystack when you can own the entire thing

[Seasonal]

Bogleheads -

I know over the long term the return difference is a rounding error. The risks is essentially the same.

What is your preference and why between Total Stock and S&P 500?

Tony

S&P 500. Why carry the baggage of extra 3000 stocks which make up just 15% of its total value ?

Baggage is an odd way to characterize 15% of the market. The answer is diversification.

It's not as if it requires any extra effort on your part.

[Marseille07]

Total Stock.

To extend Bogle's metaphor, why own part of the haystack when you can own the entire thing

Because Mr. Buffett blessed that part of the haystack.

[z3r0c00l]

What is your preference and why between Total Stock and S&P 500?

S&P 500. Why carry the baggage of extra 3000 stocks which make up just 15% of its total value ?

So as not to have to fuss when one of those 3000 turns out to be Tesla. By the time everyone was fretting about the earthshaking things that were going to happen when Tesla was added to the S&P 500 on December 21st, 2020, I had been holding it in Total Stock for ten years.

The Next Tesla will automatically get added at some point to S&P 500 once it gets big enough. Did this addition of Tesla make any significant difference ? No. The next one won't either.

Didn't Tesla add 1.5% or so? Worth capturing imho.

[WarAdmiral]

Bogleheads -

I know over the long term the return difference is a rounding error. The risks is essentially the same.

What is your preference and why between Total Stock and S&P 500?

Tony

S&P 500. Why carry the baggage of extra 3000 stocks which make up just 15% of its total value ?

Baggage is an odd way to characterize 15% of the market. The answer is diversification.

It's not as if it requires any extra effort on your part.

If the first 500 stocks are not going to provide adequate diversification, the last 3000 certainly won't. The 3000 are basically grains of sand versus rocks and pebbles in S&P 500. Agree that it's not any extra effort on my part.

[Enjoy11]

S&P 500. A powerhouse of large and some mid cap companies and various industries and businesses. Well diversified. Performs well (so far).

Plus it’s the only domestic index offered in the retirement plan. I live with it and I don’t worry about lacking small cap exposure.

I guess I’m too lazy to be concerned about the practical difference. I just feed the 500 fund and watch.

[UpperNwGuy]

I used to hold Total Stock, but in March 2020 I tax loss harvested it all into S&P 500, thinking I would be tax loss harvesting it back to Total Stock within a few months. I now doubt I'll be able to tax loss harvest it back, so in April I'm going to start to add Extended Market until I arrive at a Total Stock equivalent.

[JD2775]

I prefer total stock market. I have 100% VFIAX in my Roth and 100% VTSAX in my taxable. I used to have both accounts 100% in VTSAX but changed the Roth for TLH purposes, should I ever utilize that.

That said, I have no real rational reason why I prefer total stock market. Just seems more diversified to me, I guess.

[MishkaWorries]

VT (Vanguard Total World Stock Index Fund).

If you're going to own total market own the whole thing. Don't try to pick and choose which country will outperform. We know nothing.

[ajcp]

Bogleheads -

I know over the long term the return difference is a rounding error. The risks is essentially the same.

What is your preference and why between Total Stock and S&P 500?

Tony

S&P 500. Why carry the baggage of extra 3000 stocks which make up just 15% of its total value ?

Baggage is an odd way to characterize 15% of the market. The answer is diversification.

It's not as if it requires any extra effort on your part.

If the first 500 stocks are not going to provide adequate diversification, the last 3000 certainly won't. The 3000 are basically grains of sand versus rocks and pebbles in S&P 500. Agree that it's not any extra effort on my part.

85 is about 5.5 the size of 15. A rock is about 100 million times the size of a grain of sand.

[Bama12]

Total Stock-I like to slice and dice but VTI over 500 due to the added small cap in VTI.

Vanguard-Brokerage
Vanguard Federal M.M-VMFXX-50%
Vanguard Total Stock Market-VTI-50%

Vanguard-Roth IRA
Vanguard Wellesley Income-VWINX-25%
Vanguard Total Stock Market-VTI-25%
Vanguard S&P Small Cap 600 Value-VIOV-25%
Vanguard Real Estate-VNQ-25%

Vanguard-401K
Vanguard Total Stock Market-VTSAX-15%
Vanguard Value Index-VVIAX-15%
Vanguard Small Cap Index-VSMAX-15%
Vanguard Small Value-VSIAX-15%
Vanguard Developed-VTMGX-15%
Vanguard Emerging-VEMAX -15%
Vanguard Total Bond-VBTLX-10%

[DB2]

VT (Vanguard Total World Stock Index Fund).

If you're going to own total market own the whole thing. Don't try to pick and choose which country will outperform. We know nothing.

Agreed.

[watchnerd]

VT (Vanguard Total World Stock Index Fund).

If you're going to own total market own the whole thing. Don't try to pick and choose which country will outperform. We know nothing.

I added frontier markets to VT to make it even more whole thing.

[NS_Bane]

Not many people know the difference between the S&P 500 and Total Stock.

- S&P 500 consists of 500 companies with a market cap of at least US $11.8 billion, hand picked by a committee according to certain criteria. S&P recently made companies with more than one share class of common stock ineligible for inclusion, although existing companies in the S&P 500 were grandfathered in. This means a future Facebook will be ineligible for the S&P 500.

There is also a waiting list to be considered for the S&P 500. KKR has a market cap of $22 billion, but it's not included in the S&P 500.

- Total Stock market funds include all traded companies with no minimum market cap, including those with multiple share classes.

I buy total stock ETFs for this reason.

[MishkaWorries]

VT (Vanguard Total World Stock Index Fund).

If you're going to own total market own the whole thing. Don't try to pick and choose which country will outperform. We know nothing.

I added frontier markets to VT to make it even more whole thing.

Ah, FM means frontier market. I've never heard of that before. Why aren't those countries (Kuwait, Romania, Kazakhstan, etc) not included in VT? I mean they're not North Korea or Kyrgyzstan type of countries.

[watchnerd]

VT (Vanguard Total World Stock Index Fund).

If you're going to own total market own the whole thing. Don't try to pick and choose which country will outperform. We know nothing.

I added frontier markets to VT to make it even more whole thing.

Ah, FM means frontier market. I've never heard of that before. Why aren't those countries (Kuwait, Romania, Kazakhstan, etc) not included in VT? I mean they're not North Korea or Kyrgyzstan type of countries.

Expense ratio, probably. And maybe liquidity requirements.

iShares FM has an expense ratio of 0.79, although normalized to market weight for frontier markets, that's tiny (0.79 * .004 = .003 ER weighted).

FTSE has a Frontier Markets index that fits the FTSE index VT uses; I have to use the MSCI index, though, because there is no fund or ETF that uses the FTSE Frontier Market index.

And it's <1% of the total global market cap, so it doesn't really matter much unless you're just being a completionist, like me.

[Monsterflockster]

VTI trends more S&P500 than the Dow. Doesn’t really matter.

[Johm221122]

I didn't have a choice most of my investment timeline. Now that I do, S&P 500 works better because I overweight Mid/Small cap.
But for most people I would recommend Total Stock Market index

[Stumptowngal]

We’ve had both for a long time: S&P 500 in taxable and Total stock in IRA.

If I had to pick one, it would be Total Stock just because it seems more complete. To that end we also added Total World a couple of years ago.

[Cycle]

Total stock. I try to hold global market weight equities, and it's easy to do that with total stock and vxus

[Candor]

I started with the S&P 500 because it was the most broad based index in my 401k and I have just stuck with it now that I have other options because it's the one that brought me to the dance or something like that. Inertia mostly.

[xraygoggles]

Total stock for diversification and being more passive.

S&P 500 may be a bit more tax efficient.

As noted, over time the difference is rounding error.

S&P 500 is more tax-efficient than Total Stock? Why is that?

Should I be buying S&P in my taxable and VTI in pre-tax then?

[xraygoggles]

Bogleheads -

I know over the long term the return difference is a rounding error. The risks is essentially the same.

What is your preference and why between Total Stock and S&P 500?

Tony

VT/VTWAX

The *real* total stock.

And I add a dash of FM just to take it to 11.

What do you use for frontier?