Approximating Total Stock Market - Wiki Update

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IRouteIP
Posts: 53
Joined: Mon Aug 31, 2020 7:51 pm

Approximating Total Stock Market - Wiki Update

Post by IRouteIP »

I noticed the wiki on approximating the total stock market was updated recently. Using S&P500 and Russell 2000, it went from 83/17 to 90/10. Is this to reflect how much larger the large caps have become in relation to the small caps? Or just a correction?

I was following it to approximate the total stock market in my 401k, which does not offer a TSM fund. But now with the small caps being such a small percentage, I'm thinking at my next rebalance I would just go with the S&P500 for simplicity. I know many here are fine with S&P500 only and the difference it make is negligible, but it just made me feel better knowing that whatever runs, I have it.
sycamore
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Re: Approximating Total Stock Market - Wiki Update

Post by sycamore »

IRouteIP wrote: Wed Jul 21, 2021 5:36 pm I noticed the wiki on approximating the total stock market was updated recently. Using S&P500 and Russell 2000, it went from 83/17 to 90/10. Is this to reflect how much larger the large caps have become in relation to the small caps? Or just a correction?

I was following it to approximate the total stock market in my 401k, which does not offer a TSM fund. But now with the small caps being such a small percentage, I'm thinking at my next rebalance I would just go with the S&P500 for simplicity. I know many here are fine with S&P500 only and the difference it make is negligible, but it just made me feel better knowing that whatever runs, I have it.
If I'm reading that wiki page history correctly, the update affected more than just the percentages. The previous entry was actually a mix of 3 funds S&P500, S&P MidCap 400 (IJH), S&P SmallCap 600 (IJR). It was one change among many, apparently to simplify the various portfolios (?).

Here's the particular edit: https://www.bogleheads.org/w/index.php? ... ldid=71792
MtnBiker
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Re: Approximating Total Stock Market - Wiki Update

Post by MtnBiker »

According to the Wiki, the total stock market is 82% S&P500 and 18% Extended Market (everything else).

The Russell 2000 index is defined as the 2000 smallest companies of the first 3000. So it would seem that using S&P500 + Russell 2000 misses 500 of the top 1000 companies. I guess the 90/10 split listed in the Wiki is thought to "perform" as close as possible to the TSM using just these two imperfect indices?
Topic Author
IRouteIP
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Re: Approximating Total Stock Market - Wiki Update

Post by IRouteIP »

MtnBiker wrote: Wed Jul 21, 2021 7:12 pm According to the Wiki, the total stock market is 82% S&P500 and 18% Extended Market (everything else).

The Russell 2000 index is defined as the 2000 smallest companies of the first 3000. So it would seem that using S&P500 + Russell 2000 misses 500 of the top 1000 companies. I guess the 90/10 split listed in the Wiki is thought to "perform" as close as possible to the TSM using just these two imperfect indices?
I supposed we could add the S&P MidCap 400 and get to 2900 of the 3000. The closest mix in the wiki to that is:

83% Fidelity 500 Index Fund (FXAIX)
8% Fidelity Mid Cap Index Fund (FSMDX)
9% Fidelity Small Cap Index Fund (FSSNX)

https://www.bogleheads.org/wiki/Approxi ... ock_market

But when you are talking 8% of the domestic allocation of the stock allocation of the whole portfolio, is it worth it?
okwriter
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Re: Approximating Total Stock Market - Wiki Update

Post by okwriter »

sycamore wrote: Wed Jul 21, 2021 7:02 pm If I'm reading that wiki page history correctly, the update affected more than just the percentages. The previous entry was actually a mix of 3 funds S&P500, S&P MidCap 400 (IJH), S&P SmallCap 600 (IJR). It was one change among many, apparently to simplify the various portfolios (?).
There was no loss of content - the page was just split into 3 sections. If you scroll down, you'll find the entry you mentioned.
MtnBiker wrote: Wed Jul 21, 2021 7:12 pm The Russell 2000 index is defined as the 2000 smallest companies of the first 3000. So it would seem that using S&P500 + Russell 2000 misses 500 of the top 1000 companies. I guess the 90/10 split listed in the Wiki is thought to "perform" as close as possible to the TSM using just these two imperfect indices?
You're right, it's imperfect. I updated these numbers, and noticed that this combination had a larger error than the other examples. (It's also why it's near the bottom; the table is roughly ordered from more accurate to less.)
mervinj7
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Re: Approximating Total Stock Market - Wiki Update

Post by mervinj7 »

okwriter wrote: Thu Jul 22, 2021 3:49 am
sycamore wrote: Wed Jul 21, 2021 7:02 pm If I'm reading that wiki page history correctly, the update affected more than just the percentages. The previous entry was actually a mix of 3 funds S&P500, S&P MidCap 400 (IJH), S&P SmallCap 600 (IJR). It was one change among many, apparently to simplify the various portfolios (?).
There was no loss of content - the page was just split into 3 sections. If you scroll down, you'll find the entry you mentioned.
MtnBiker wrote: Wed Jul 21, 2021 7:12 pm The Russell 2000 index is defined as the 2000 smallest companies of the first 3000. So it would seem that using S&P500 + Russell 2000 misses 500 of the top 1000 companies. I guess the 90/10 split listed in the Wiki is thought to "perform" as close as possible to the TSM using just these two imperfect indices?
You're right, it's imperfect. I updated these numbers, and noticed that this combination had a larger error than the other examples. (It's also why it's near the bottom; the table is roughly ordered from more accurate to less.)
The real question is whether we can finally get rid of those John Hancock funds in the list. Not sure if I've ever seen a single post requesting that combo.
okwriter
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Re: Approximating Total Stock Market - Wiki Update

Post by okwriter »

mervinj7 wrote: Thu Jul 22, 2021 8:55 am The real question is whether we can finally get rid of those John Hancock funds in the list. Not sure if I've ever seen a single post requesting that combo.
They've been replaced with publicly available equivalents. Coincidentally, a post in this very thread requested that combo :D
IRouteIP wrote: Wed Jul 21, 2021 9:07 pm I supposed we could add the S&P MidCap 400 and get to 2900 of the 3000.
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