Total Stock Index Fund vs SP 500
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Total Stock Index Fund vs SP 500
I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
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Re: Total Stock Index Fund vs SP 500
Yes it does.
- ruralavalon
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Re: Total Stock Index Fund vs SP 500
Yes.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
But how does anyone know that large companies will be down and mid and small companies will be up?
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Re: Total Stock Index Fund vs SP 500
ruralavalon wrote:Yes.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
But how does anyone know that large companies will be down and mid and small companies will be up?
very true just was wondering if that is another possibility.
Re: Total Stock Index Fund vs SP 500
1. Maybe. Maybe even probably. However it is path dependent. I doubt that we would see a smooth outperformance of small cap vs. large cap. For example, if the market had high volatility and was mean reverting then Total Stock would have lower preformance because of how it rebalances.
2. You may not even notice. The small cap portion of Total Stock is low so small cap would have to seriously outperform.
2. You may not even notice. The small cap portion of Total Stock is low so small cap would have to seriously outperform.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Re: Total Stock Index Fund vs SP 500
What is the Sharpe Ratio for each of these? Where do I find it?
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Re: Total Stock Index Fund vs SP 500
Total Stock Market doesn't need to rebalance except for index changes. Given that the question is about the CAGR of small caps vs. large caps, I think the answer is an unqualified "yes".alex_686 wrote:1. Maybe. Maybe even probably. However it is path dependent. I doubt that we would see a smooth outperformance of small cap vs. large cap. For example, if the market had high volatility and was mean reverting then Total Stock would have lower preformance because of how it rebalances.
2. You may not even notice. The small cap portion of Total Stock is low so small cap would have to seriously outperform.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: Total Stock Index Fund vs SP 500
It depends.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
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Finding the "Sharpe Ratio" of a fund.
tomander:tomander wrote:What is the Sharpe Ratio for each of these? Where do I find it?
Go to Morningstar, then put in the fund name or ticker symbol in the "Stock/fund" box at the top of every page. When the fund pops up, look for the light-grey bar across the top and hit "Ratings & Risk." Scroll down and you will find the Sharpe Ratio.
Best wishes
Taylor
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Re: Total Stock Index Fund vs SP 500
As you say they are close. I switched between SP 500 & TSM for tax loss harvesting in 2008-9. When the music stopped in March 2009 I found myself in the SP 500 chair. Still there today. Would have preferred TSM, but it was not to be. At least I had a chair (did not sell).
Re: Total Stock Index Fund vs SP 500
Thank you Taylor
Re: Total Stock Index Fund vs SP 500
since 2002 or so the total has done about .6 better-from vanguard website
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Re: Total Stock Index Fund vs SP 500
There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
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Re: Total Stock Index Fund vs SP 500
There is: you have maximum diversification with respect to the market: the so-called beta factor. Whether that shows up as an advantage against the SP500 over any arbitrary timeline is another matter.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: Total Stock Index Fund vs SP 500
Vanguard's TSM fund (VTSAX) is 73% Large-Cap, 18% Mid-Cap, and 9% Small-Cap. (Note that the S&P 500 itself is 13% mid-cap.)indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
Smaller-cap stocks tend to have higher risk and higher return. Over the long term, a TSM fund will have slightly higher returns and slightly higher volatility, compared to an S&P 500 fund. But the difference will be small, because the S&P 500 makes up about 80% of the TSM. TSM will also tend to have a slightly lower dividend yield.
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Re: Total Stock Index Fund vs SP 500
where did you get that break down of TSM.venkman wrote:Vanguard's TSM fund (VTSAX) is 73% Large-Cap, 18% Mid-Cap, and 9% Small-Cap. (Note that the S&P 500 itself is 13% mid-cap.)indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
Smaller-cap stocks tend to have higher risk and higher return. Over the long term, a TSM fund will have slightly higher returns and slightly higher volatility, compared to an S&P 500 fund. But the difference will be small, because the S&P 500 makes up about 80% of the TSM. TSM will also tend to have a slightly lower dividend yield.
Thank You
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Re: Total Stock Index Fund vs SP 500
With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
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Re: Total Stock Index Fund vs SP 500
Sure, and you can see it in action during the 2002 bear when small-cap outperformed.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
As always, in any market-weight index the effects of small-cap will be muted due their lesser market share. During that period, those with a significant tilt to small obviously saw a greater effect.
Re: Total Stock Index Fund vs SP 500
The real possibility of TSM outperformance over time is because of more mid and 9% small in TSM but it does take a long time to notice.indexonlyplease wrote:I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
http://www.nasdaq.com/article/heres-why ... 0-cm459910
Paul
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Re: Total Stock Index Fund vs SP 500
This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
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Re: Total Stock Index Fund vs SP 500
That's part of it. But just to the right of that you see a Morningstar style box, consisting of 9 smaller boxes, which show the percentage of the fund which is invested in each of 9 categories.indexonlyplease wrote:This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
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Re: Total Stock Index Fund vs SP 500
That's fine if you want a market-weight fund. I have a slice-and-dice tilted portfolio, so total market funds just complicate things. I prefer more pure large or small cap funds, so I use S&P 500 for the bulk of my large blend allocation.ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.
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Re: Total Stock Index Fund vs SP 500
ruralavalon wrote:That's part of it. But just to the right of that you see a Morningstar style box, consisting of 9 smaller boxes, which show the percentage of the fund which is invested in each of 9 categories.indexonlyplease wrote:This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
Just found it. That really makes it easy to understand you have money in value, blend, growth in each sector.
So, I should use these numbers to match the total stock fund. Since my wife's 401k only offers 3 index of large, med, small. But then again keeping up with the balancing could be a pain? In stead of just all in the sp 500
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Re: Total Stock Index Fund vs SP 500
If a 401k, 403b or 457 plan offers a S&P 500 index fund but no total stock market index fund, then I suggest just using the S&P 500 Fund for domestic stocks.indexonlyplease wrote:ruralavalon wrote:That's part of it. But just to the right of that you see a Morningstar style box, consisting of 9 smaller boxes, which show the percentage of the fund which is invested in each of 9 categories.indexonlyplease wrote:This is what I am looking for??ruralavalon wrote:With Vanguard Total Stock Market Index Fund you get more diversification than Vanguard 500 Index Fund at no extra expense. That's the reason to hold the total market fund. It's a no brainer if the total market fund is available in whatever account you are using.indexonlyplease wrote:There has to be a good reason to hold the TSM over the 500.
The returns are close but is there less risk in markets?
If small and mid make a run are we better with TSM?
I am just asking so I understand better.
Also where is the breakdown of what the TSM holds in percent. large, med, small value etc. I did not see it on the Vanguard site.
To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
Market Capitalization
Size % of Portfolio Benchmark Category Avg
Giant 40.90 44.58 68.88
Large 30.64 33.04 12.05
Medium 19.16 20.41 16.51
Small 6.72 1.97 2.42
Micro 2.58 0.00 0.14
Just found it. That really makes it easy to understand you have money in value, blend, growth in each sector.
So, I should use these numbers to match the total stock fund. Since my wife's 401k only offers 3 index of large, med, small. But then again keeping up with the balancing could be a pain? In stead of just all in the sp 500
If she wants to mimic the content of the total stock market index fund see the wiki article "approximating total stock market" for the fund mix to use.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
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Re: Total Stock Index Fund vs SP 500
FWIW, here's a link to Morningstar chart showing the total return of the Wilshire 5000 Total Market vs. S&P 500 Total Return since 1970.
You can find individual time periods where it would have been slightly better to be in one over the other, but it's a small difference that unpredictably waxes and wanes, and over the longer term becomes increasingly insignificant (especially for someone whose money will be averaged in/out over long periods of time).
Picking between them or trying to find just the right balance is silly (IMO). I would say to go with whichever you'll feel better about with the conviction to stay the course. Some people will like the increased diversification in TSM over the 500, some people may like the idea of the mostly larger 'leading companies' in the S&P 500 that's is highly reported on and has lots of information reported on in the media.
You can find individual time periods where it would have been slightly better to be in one over the other, but it's a small difference that unpredictably waxes and wanes, and over the longer term becomes increasingly insignificant (especially for someone whose money will be averaged in/out over long periods of time).
Picking between them or trying to find just the right balance is silly (IMO). I would say to go with whichever you'll feel better about with the conviction to stay the course. Some people will like the increased diversification in TSM over the 500, some people may like the idea of the mostly larger 'leading companies' in the S&P 500 that's is highly reported on and has lots of information reported on in the media.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: Total Stock Index Fund vs SP 500
Indexonlyplease:So, I should use these numbers to match the total stock fund. Since my wife's 401k only offers 3 index of large, med, small. But then again keeping up with the balancing could be a pain? In stead of just all in the sp 500
There is no need to exactly match the Total Stock Market Fund if the alternate is trying to match it with a bunch of smaller funds. The S&P 500 Index fund in your wife's 401k is an excellent alternative to TSM because it holds the biggest and most successful companies in the USA. As shown above, their past returns have been almost the same. I doubt if adding more U.S. companies with their higher cost, less tax-efficiency and greater complexity is worth the bother.
Read my "Simplicity" link below.
Best wishes.
Taylor
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Re: Total Stock Index Fund vs SP 500
I do find it interesting that both Mr. Bogle and Warren Buffet have recommended the SP500 however Bob Brinker has been recommending the Vanguard Total Stock Market for many years. I’m also a huge fan of all three and have listened to Bob Brinker’s Moneytalk radio show since the early 90’s.
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Re: Total Stock Index Fund vs SP 500
So for me the question is: for example in a taxable account, can TSM rebalance more tax efficiently than an individual can? At least, on a sector-weighted basis? And would that efficiency hold true among providers other than VG where they don't have the secret tax fund/etf swap sauce?
Re: Total Stock Index Fund vs SP 500
You know, I don't know how much weight I put in those quotes. It is like when people say Kleenex, Xerox, or Google. The brand names just dominate the product category and I don't know if people are referring to the specific brand or just to the product category.watchman1675 wrote: ↑Wed Jun 06, 2018 2:28 pm I do find it interesting that both Mr. Bogle and Warren Buffet have recommended the SP500 however Bob Brinker has been recommending the Vanguard Total Stock Market for many years. I’m also a huge fan of all three and have listened to Bob Brinker’s Moneytalk radio show since the early 90’s.
Quick question, can you tell me without looking it up what S&P stands for? What about CRSP?
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: Total Stock Index Fund vs SP 500
S&P = Standard & Poorsalex_686 wrote: ↑Wed Jun 06, 2018 2:45 pmYou know, I don't know how much weight I put in those quotes. It is like when people say Kleenex, Xerox, or Google. The brand names just dominate the product category and I don't know if people are referring to the specific brand or just to the product category.watchman1675 wrote: ↑Wed Jun 06, 2018 2:28 pm I do find it interesting that both Mr. Bogle and Warren Buffet have recommended the SP500 however Bob Brinker has been recommending the Vanguard Total Stock Market for many years. I’m also a huge fan of all three and have listened to Bob Brinker’s Moneytalk radio show since the early 90’s.
Quick question, can you tell me without looking it up what S&P stands for? What about CRSP?
CRSP = ???? Some other group of indexes.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Total Stock Index Fund vs SP 500
CRSP is The Center for Research in Security Prices. They are behind the CRSP US Total Market Index, which is the index that Total Stock Market uses. The University of Chicago Booth School of Business does not have much of a marketing budget. IIRC, only Vanguard uses the CRSP indexes.
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Re: Total Stock Index Fund vs SP 500
delete
Last edited by Superleaf444 on Sat Aug 15, 2020 7:07 am, edited 1 time in total.
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Re: Total Stock Index Fund vs SP 500
If you were able to perfectly replicate the TSM with 2-3 other funds at market weight and let that ride it shouldn't actually deviate much at all from TSM, but in theory TSM would have less tax impact from companies that move up/down into a different fund cap-size. Both should roughly maintain market weight and balance themselves by that fact. Same applies to Total US & Total Int.boglewill34 wrote: ↑Wed Jun 06, 2018 2:43 pm So for me the question is: for example in a taxable account, can TSM rebalance more tax efficiently than an individual can? At least, on a sector-weighted basis? And would that efficiency hold true among providers other than VG where they don't have the secret tax fund/etf swap sauce?
The reality though is that there are MUCH bigger decisions to make. These funds are best considered interchangeable. Also don't forget the Vanguard Large-cap index, which is 750 companies I believe and falls in-between these two .
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Re: Total Stock Index Fund vs SP 500
Many people prefer small-cap value over small-cap and choose to do SP500 OR TSM, and then tilt to SCV. I do this myself but I use the ETF VIOV since the S&P600 is a more true small-cap index than Vanguards CRSP, which I consider a 50/50 mid/small.Superleaf444 wrote: ↑Fri Jul 27, 2018 11:29 am^Right?!watchman1675 wrote: ↑Wed Jun 06, 2018 2:28 pm I do find it interesting that both Mr. Bogle and Warren Buffet have recommended the SP500 however Bob Brinker has been recommending the Vanguard Total Stock Market for many years. I’m also a huge fan of all three and have listened to Bob Brinker’s Moneytalk radio show since the early 90’s.
Ya' know, I've been thinking a lot about this and trying to figure which way I want to go. I see the benefits of both. I was also thinking maybe SP500 and a small percentage into VSMAX. That way, I'm covered in large cap and have a little more than your standard small cap that the TSM incorporates.
If I were you I'd just default to TSM and then us SP500 wherever you need to (such as a 401k that only has it).
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Re: Total Stock Index Fund vs SP 500
indexonlyplease:indexonlyplease wrote: ↑Sun Jul 16, 2017 1:02 pm I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
Jack Bogle wrote:
Best wishes"The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk. -- In my view, owning the market and holding it forever is the ultimate strategy for winners."
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Total Stock Index Fund vs SP 500
I agree and have owned the 3 fund for 3 years now. Also, I ordered you new book that will be here tomorrow. I am really happy to make this my main book since I am a 3 fund holder.Taylor Larimore wrote: ↑Fri Jul 27, 2018 2:46 pmindexonlyplease:indexonlyplease wrote: ↑Sun Jul 16, 2017 1:02 pm I understand that the total index fund and SP500 returns are really close.
Question: lf the large companies in the SP 500 are down for the next 10 years and the mid and small caps are up for the next 10, does this mean the total stock index with have a better return the the SP 500????
Jack Bogle wrote:Best wishes"The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk. -- In my view, owning the market and holding it forever is the ultimate strategy for winners."
Taylor
Thank You for the response.
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Re: Total Stock Index Fund vs SP 500
delete
Last edited by Superleaf444 on Sat Aug 15, 2020 7:07 am, edited 1 time in total.
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Re: Total Stock Index Fund vs SP 500
You may be misunderstanding VIIIX. Vanguard Institutional Index Fund Institutional Plus VIIIX) ER 0.02% IS an S&P 500 index fund (not "sorta clone of a SP500 fund"), and is a very good domestic stock fund, you can't beat that expense ratio.Superleaf444 wrote: ↑Fri Jul 27, 2018 6:13 pmAfter your comment I decided to poke around in my 401k options. TSM is only offered in target-dated funds and a sorta clone of an SP500 fund (VIIIX) is offered [emphasis added] as a single fund. I guess I should just stick to the target date in my 401k, it does have a much lower expense ratio than your standard one (0.08%) but it still higher than VTSAX :'(MojoTrojan wrote: If I were you I'd just default to TSM and then us SP500 wherever you need to (such as a 401k that only has it).
Potentially with my 401k assets, I could get my expense ratio closer to 0.05% (because of a mix of the mix of international index and a bond index).
Either way, thx for this thread it is interesting considering how many advocates each has.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy