Total Stock Index Fund vs SP 500

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indexonlyplease
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Total Stock Index Fund vs SP 500

Post by indexonlyplease »

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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whodidntante
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Re: Total Stock Index Fund vs SP 500

Post by whodidntante »

Yes it does.
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ruralavalon
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Re: Total Stock Index Fund vs SP 500

Post by ruralavalon »

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????
Yes.

But how does anyone know that large companies will be down and mid and small companies will be up?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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indexonlyplease
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Re: Total Stock Index Fund vs SP 500

Post by indexonlyplease »

ruralavalon wrote:
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????
Yes.

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.
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Re: Total Stock Index Fund vs SP 500

Post by alex_686 »

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.
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tomander
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Re: Total Stock Index Fund vs SP 500

Post by tomander »

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

Post by triceratop »

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.
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".
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Re: Total Stock Index Fund vs SP 500

Post by mickeyd »

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????
It depends.
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Taylor Larimore
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Finding the "Sharpe Ratio" of a fund.

Post by Taylor Larimore »

tomander wrote:What is the Sharpe Ratio for each of these? Where do I find it?
tomander:

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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Leif
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Re: Total Stock Index Fund vs SP 500

Post by Leif »

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).
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Re: Total Stock Index Fund vs SP 500

Post by tomander »

Thank you Taylor
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Re: Total Stock Index Fund vs SP 500

Post by Kennyt7 »

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

Post by indexonlyplease »

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.
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Re: Total Stock Index Fund vs SP 500

Post by triceratop »

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.
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.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
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Re: Total Stock Index Fund vs SP 500

Post by venkman »

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.
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.)

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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indexonlyplease
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Re: Total Stock Index Fund vs SP 500

Post by indexonlyplease »

venkman wrote:
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.
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.)

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.
where did you get that break down of TSM.

Thank You
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Re: Total Stock Index Fund vs SP 500

Post by ruralavalon »

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.
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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Total Stock Index Fund vs SP 500

Post by Earl Lemongrab »

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????
Sure, and you can see it in action during the 2002 bear when small-cap outperformed.

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.
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Re: Total Stock Index Fund vs SP 500

Post by pkcrafter »

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????
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.

http://www.nasdaq.com/article/heres-why ... 0-cm459910



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indexonlyplease
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Re: Total Stock Index Fund vs SP 500

Post by indexonlyplease »

ruralavalon wrote:
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.
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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
This is what I am looking for??
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

Post by ruralavalon »

indexonlyplease wrote:
ruralavalon wrote:
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.
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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
This is what I am looking for??
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
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.
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Earl Lemongrab
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Re: Total Stock Index Fund vs SP 500

Post by Earl Lemongrab »

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.
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.
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indexonlyplease
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Re: Total Stock Index Fund vs SP 500

Post by indexonlyplease »

ruralavalon wrote:
indexonlyplease wrote:
ruralavalon wrote:
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.
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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
This is what I am looking for??
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
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.

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

Post by ruralavalon »

indexonlyplease wrote:
ruralavalon wrote:
indexonlyplease wrote:
ruralavalon wrote:
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.
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.

To see the breakdown of either fund, look at the "portfolio" tab for each fund on Morningstar.
This is what I am looking for??
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
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.

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 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.

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 | Wiki article link: Bogleheads® investment philosophy
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JoMoney
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Re: Total Stock Index Fund vs SP 500

Post by JoMoney »

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.
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Taylor Larimore
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Re: Total Stock Index Fund vs SP 500

Post by Taylor Larimore »

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
Indexonlyplease:

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

Post by watchman1675 »

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

Post by boglewill34 »

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?
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Re: Total Stock Index Fund vs SP 500

Post by alex_686 »

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.
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.

Quick question, can you tell me without looking it up what S&P stands for? What about CRSP?
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Re: Total Stock Index Fund vs SP 500

Post by ruralavalon »

alex_686 wrote: Wed Jun 06, 2018 2:45 pm
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.
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.

Quick question, can you tell me without looking it up what S&P stands for? What about CRSP?
S&P = Standard & Poors

CRSP = ???? Some other group of indexes.
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Re: Total Stock Index Fund vs SP 500

Post by alex_686 »

ruralavalon wrote: Wed Jun 06, 2018 3:13 pm CRSP = ???? Some other group of indexes.
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

Post by Superleaf444 »

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Re: Total Stock Index Fund vs SP 500

Post by MotoTrojan »

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?
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.

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

Post by MotoTrojan »

Superleaf444 wrote: Fri Jul 27, 2018 11:29 am
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.
^Right?!

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.
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.

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

Post by Taylor Larimore »

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????
indexonlyplease:

Jack Bogle wrote:
"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."
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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indexonlyplease
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Re: Total Stock Index Fund vs SP 500

Post by indexonlyplease »

Taylor Larimore wrote: Fri Jul 27, 2018 2:46 pm
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????
indexonlyplease:

Jack Bogle wrote:
"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."
Best wishes
Taylor
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.

Thank You for the response.
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Re: Total Stock Index Fund vs SP 500

Post by Superleaf444 »

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Re: Total Stock Index Fund vs SP 500

Post by ruralavalon »

Superleaf444 wrote: Fri Jul 27, 2018 6:13 pm
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).
After 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. :oops: 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 :'(

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.
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.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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