Help w/ portfolio & w/ approximating stock market
- sighchological
- Posts: 186
- Joined: Sat Feb 02, 2013 11:12 am
Help w/ portfolio & w/ approximating stock market
Hello everyone, at age 31 it's almost my 5th year investing; thanks for everyone's help here.
I’m very likely to move 30% of U.S stocks into international, however, before doing so I have a question regarding approximating the total stock market :
----------------------------------
Desired Asset Allocation: 80% stocks (30% international), 20% bonds.
My current portfolio (Me-457B through NY State Deferred Compensation Plan, Wife-403B (age 30) through her university, TIAA-Cref) looks like this:
Small Cap:
NYSDCB Russell 2500 Index Unitized Account; $26,282.54 (ER, 0.02%) (457B)
Large Cap
NYSDCB Equity Index Unitized Account (E.R, 0.01%); $29,241.35 (457B)
(VINIX) Vanguard Institutional Index Fund Institutional Shares; $74,737.69 (403B)
Total Stock Market
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares; $16,591.33 (Roth IRA)
Bonds:
NYSDCB US Debt Index Unitized Account; (ER, 0.02%) $2,998.83 (457B)
(VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares; $15,937.19 (E fund Roth IRA)
TIAA Traditional; $5,105.94 (403B)
---------------------
Total portfolio:
Small Cap: $26,282.54
S&P and Total Market: $120,570.37
Bonds: $24,041.96
Total Portfolio Amount: $170,894.87
---------------------
I have $146,852.91 in stocks, 30% of that is $44,055.873.
---------------------
My wife’s 403B through TIAA-Cref has (VTIAX) Total International Stock Index Fund Admiral Shares (0.11%).
MY plan is to:
1) In wife’s 403B, sell VINIX and buy VTIAX to be 30% of international stocks in equities.
2) In my 457B, sell NYSDCB Russell 2500 Index Unitized Account to equal 18% of domestic equities and buy NYSDCB US Debt Index Unitized Account to meet 20% of portfolio in bonds.
Questions:
1) The Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) in my Roth IRA is making it more complicated to rebalance. Should I replace VTSAX with Vanguard 500 Index Fund Admiral Shares (VFIAX)?
2) If #1 is OK, is it OK that I continue to approximate the total stock market with 18% small cap and 82% large cap and leave out mid caps?
2a) Will there be a point where I should start adding mid caps? I have Vanguard(R) Strategic Equity Fund - Investor Shares, ER (0.18%) in my 457B plan.
3) Any other concerns or suggestions?
I’m very likely to move 30% of U.S stocks into international, however, before doing so I have a question regarding approximating the total stock market :
----------------------------------
Desired Asset Allocation: 80% stocks (30% international), 20% bonds.
My current portfolio (Me-457B through NY State Deferred Compensation Plan, Wife-403B (age 30) through her university, TIAA-Cref) looks like this:
Small Cap:
NYSDCB Russell 2500 Index Unitized Account; $26,282.54 (ER, 0.02%) (457B)
Large Cap
NYSDCB Equity Index Unitized Account (E.R, 0.01%); $29,241.35 (457B)
(VINIX) Vanguard Institutional Index Fund Institutional Shares; $74,737.69 (403B)
Total Stock Market
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares; $16,591.33 (Roth IRA)
Bonds:
NYSDCB US Debt Index Unitized Account; (ER, 0.02%) $2,998.83 (457B)
(VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares; $15,937.19 (E fund Roth IRA)
TIAA Traditional; $5,105.94 (403B)
---------------------
Total portfolio:
Small Cap: $26,282.54
S&P and Total Market: $120,570.37
Bonds: $24,041.96
Total Portfolio Amount: $170,894.87
---------------------
I have $146,852.91 in stocks, 30% of that is $44,055.873.
---------------------
My wife’s 403B through TIAA-Cref has (VTIAX) Total International Stock Index Fund Admiral Shares (0.11%).
MY plan is to:
1) In wife’s 403B, sell VINIX and buy VTIAX to be 30% of international stocks in equities.
2) In my 457B, sell NYSDCB Russell 2500 Index Unitized Account to equal 18% of domestic equities and buy NYSDCB US Debt Index Unitized Account to meet 20% of portfolio in bonds.
Questions:
1) The Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) in my Roth IRA is making it more complicated to rebalance. Should I replace VTSAX with Vanguard 500 Index Fund Admiral Shares (VFIAX)?
2) If #1 is OK, is it OK that I continue to approximate the total stock market with 18% small cap and 82% large cap and leave out mid caps?
2a) Will there be a point where I should start adding mid caps? I have Vanguard(R) Strategic Equity Fund - Investor Shares, ER (0.18%) in my 457B plan.
3) Any other concerns or suggestions?
Re: Help w/ portfolio & w/ approximating stock market
TSM and 500 are very close. Compare them at Morningstar (chart) and you won’t see much of a difference. I would stick with TSM.
For small-cap, use Morningstar and look at Portfolio which will show you the breakdowns of capitalization. Most small-cap funds are a mix of mid and small.
For small-cap, use Morningstar and look at Portfolio which will show you the breakdowns of capitalization. Most small-cap funds are a mix of mid and small.
- ruralavalon
- Posts: 26297
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Help w/ portfolio & w/ approximating stock market
I suggest simply using Vanguard Total Stock Market Index Fund (VTSAX) in your Roth IRA, and Vanguard Institutional Index Fund (a S&P 500 index fund) (VINIX) in your 403b and 457.
The S&P 500 Fund covers 81% of the domestic stock market, and in the 25 years since the creation of the first total stock market index fund the two types of fund have had almost identical performance. In my opinion it's not necessary to add either small-cap or mid-cap. The rebalancing problem vanishes.
The S&P 500 Fund covers 81% of the domestic stock market, and in the 25 years since the creation of the first total stock market index fund the two types of fund have had almost identical performance. In my opinion it's not necessary to add either small-cap or mid-cap. The rebalancing problem vanishes.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Help w/ portfolio & w/ approximating stock market
I agree with ruralavalon that using a S&P 500 index fund is close enough to a Total Stock Market fund. If you look at the Fact Sheet of the NYSDCB Equity Index Unitized Account, you will see that it contains 13% mid caps. Instead of the Vanguard(R) Strategic Equity Fund - Investor Shares ER 0.18% (a mid cap value fund), I would use the Equity Index Unitized Account which is an S&P 500 index UA. If you have access to a Total Stock Market fund in other accounts like your Roth IRA, then use it rather than the 500 Index fund.
- sighchological
- Posts: 186
- Joined: Sat Feb 02, 2013 11:12 am
Re: Help w/ portfolio & w/ approximating stock market
Thanks everyone for the help.
Ruralavalon,
I have VINIX in my wife’s 403B, but not in my 457b. I have the Equity Index Unitized Account, which is a S&P 500 index. Are you saying that I should sell the small cap in my 457B and my portfolio would look like:
Large Cap
NYSDCB Equity Index Unitized Account (E.R, 0.01%); $ 45,386.87 (457B)
(VINIX) Vanguard Institutional Index Fund Institutional Shares; $ 30,681.81 (403B)
Total Stock Market
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares; $16,591.33 (Roth IRA)
International
(VTIAX) Total International Stock Index Fund Admiral Shares (0.11%); $44,055.87
Bonds:
NYSDCB US Debt Index Unitized Account; (ER, 0.02%) $ 13,135.84 (457B)
(VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares; $15,937.19 (E fund Roth IRA)
TIAA Traditional; $5,105.94 (403B)
---------------------
Total portfolio:
S&P: $76,068.68
Total Market: $16,591.33 (Roth IRA)
International: $44,055.87
Bonds: $34,178.97
Total Portfolio Amount: $170,894.87
Ruralavalon,
I have VINIX in my wife’s 403B, but not in my 457b. I have the Equity Index Unitized Account, which is a S&P 500 index. Are you saying that I should sell the small cap in my 457B and my portfolio would look like:
Large Cap
NYSDCB Equity Index Unitized Account (E.R, 0.01%); $ 45,386.87 (457B)
(VINIX) Vanguard Institutional Index Fund Institutional Shares; $ 30,681.81 (403B)
Total Stock Market
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares; $16,591.33 (Roth IRA)
International
(VTIAX) Total International Stock Index Fund Admiral Shares (0.11%); $44,055.87
Bonds:
NYSDCB US Debt Index Unitized Account; (ER, 0.02%) $ 13,135.84 (457B)
(VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares; $15,937.19 (E fund Roth IRA)
TIAA Traditional; $5,105.94 (403B)
---------------------
Total portfolio:
S&P: $76,068.68
Total Market: $16,591.33 (Roth IRA)
International: $44,055.87
Bonds: $34,178.97
Total Portfolio Amount: $170,894.87
- ruralavalon
- Posts: 26297
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Help w/ portfolio & w/ approximating stock market
deleted duplicate post
Last edited by ruralavalon on Wed Dec 13, 2017 3:12 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- ruralavalon
- Posts: 26297
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Help w/ portfolio & w/ approximating stock market
The problem.
I don't say its wrong to add mid-cap and small-cap, I do feel that it's not necessary.
For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations". An S&P 500 index fund covers 81% of the U.S. stock market, and in the 25 years since the creation of the first total stock market fund the performance of the two types of funds has been almost identical. Morningstar “growth of $10k” graph, VFINX vs VTSMX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 25 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little in performance.
If you want to add the NYSDCB Russell 2500 Index Unitized Account (an extended market type account), then an 81/19 mix of S&P 500 and Russell 2500 will approximate the content of a total stock market index fund. Wiki article, "Approximating total stock market".
Asset allocation.
Current accounts, total portfolio = $170,891.
I just couldn't follow what was where using your format, or see what to do exactly. It is easier to work in percentages rather than in dollars, and easier to work by account rather than by asset type. I had to rearrange your information.
Her 403b thru TIAA CREF (47% of total; $79,842)
(VINIX) Vanguard Institutional Index Fund Institutional Shares; $74,737.69 (403B)
TIAA Traditional; $5,105.94 (403B)
total = $79,842
His 457b thru NY State Deferred Compensation Plan (34% of total; $58,521)
NYSDCB Equity Index Unitized Account (E.R, 0.01%); $29,241.35 (457B)
NYSDCB Russell 2500 Index Unitized Account; $26,282.54 (ER, 0.02%) (457B)
NYSDCB US Debt Index Unitized Account; (ER, 0.02%) $2,998.83 (457B)
total = $55,821.
Roth IRA (19% of total; $32,528)
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares; $16,591.33 (Roth IRA)
(VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares; $15,937.19 (E fund Roth IRA)
total = $32,528.
New annual contributions?
What new annual contributions do you think you will be able to make?
Do you both have Roth IRAs?
Your plan.
Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio, modified as necessary to accommodate the fund offerings in your her 403b and his 457b. Current portfolio size = $170,891. New annual contributions = ????. The asset allocation is: 20% bonds; 25% international stocks; and 55% domestic stocks. The percentages given are percentages of the total portfolio, not of a given account. The suggestion is to switch both the existing balances and the new contributions to the funds indicated. All percentages are rounded off, so may not add up exactly. Sometimes I state 00% to indicate funds you might want to add in the future.
Her 403b thru TIAA CREF (47% of total; $79,842)
19%, Vanguard Institutional Index Fund Institutional Shares (a S&P 500 index fund) (VINIX) ER 0.04%
25%, Vanguard Total international Stock Index Fund Admiral Share (VTIAX) ER 0.11%
03%, TIAA Traditional;
His 457b thru NY State Deferred Compensation Plan (34% of total; $58,521)
26%, NYSDCB Equity Index Unitized Account (a S&P 500 index) E.R, 0.01%
00%, NYSDCB Russell 2500 Index Unitized Account ER, 0.02%
08%, NYSDCB US Debt Index Unitized Account ER, 0.02%
Roth IRA (19% of total; $32,528)
10%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
09%, Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05% (E fund, many would say not to count your emergency fund in your asset allocation, even if held in your Roth IRA.)
. . . . .
I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below.
If you have any questions just ask.
I hope that this helps.
Your issue was complicated asset allocation and rebalancing, arising from frequent re-figuring how much Russell 2500 to use in order to approximate a total stock market index fund. My solution was to eliminate the rebalancing issue by recognizing that a S&P 500 index fund and a total stock market index fund are nearly identical, functionally equivalent.sighchological wrote: ↑Tue Dec 12, 2017 7:28 pmI have VINIX in my wife’s 403B, but not in my 457b. I have the Equity Index Unitized Account, which is a S&P 500 index. Are you saying that I should sell the small cap in my 457B [Yes] and my portfolio would look like:
I don't say its wrong to add mid-cap and small-cap, I do feel that it's not necessary.
For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations". An S&P 500 index fund covers 81% of the U.S. stock market, and in the 25 years since the creation of the first total stock market fund the performance of the two types of funds has been almost identical. Morningstar “growth of $10k” graph, VFINX vs VTSMX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 25 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little in performance.
If you want to add the NYSDCB Russell 2500 Index Unitized Account (an extended market type account), then an 81/19 mix of S&P 500 and Russell 2500 will approximate the content of a total stock market index fund. Wiki article, "Approximating total stock market".
Asset allocation.
That works out to about 20% bonds, 25% international stocks, and 55% domestic stocks.sighchological wrote: ↑Mon Dec 11, 2017 9:30 pmDesired Asset Allocation: 80% stocks (30% international), 20% bonds.
Current accounts, total portfolio = $170,891.
I just couldn't follow what was where using your format, or see what to do exactly. It is easier to work in percentages rather than in dollars, and easier to work by account rather than by asset type. I had to rearrange your information.
Her 403b thru TIAA CREF (47% of total; $79,842)
(VINIX) Vanguard Institutional Index Fund Institutional Shares; $74,737.69 (403B)
TIAA Traditional; $5,105.94 (403B)
total = $79,842
His 457b thru NY State Deferred Compensation Plan (34% of total; $58,521)
NYSDCB Equity Index Unitized Account (E.R, 0.01%); $29,241.35 (457B)
NYSDCB Russell 2500 Index Unitized Account; $26,282.54 (ER, 0.02%) (457B)
NYSDCB US Debt Index Unitized Account; (ER, 0.02%) $2,998.83 (457B)
total = $55,821.
Roth IRA (19% of total; $32,528)
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares; $16,591.33 (Roth IRA)
(VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares; $15,937.19 (E fund Roth IRA)
total = $32,528.
New annual contributions?
What new annual contributions do you think you will be able to make?
Do you both have Roth IRAs?
Your plan.
sighchological wrote: ↑Mon Dec 11, 2017 9:30 pmMY plan is to:
1) In wife’s 403B, sell VINIX and buy VTIAX to be 30% of international stocks in equities.
2) In my 457B, sell NYSDCB Russell 2500 Index Unitized Account to equal 18% of domestic equities and buy NYSDCB US Debt Index Unitized Account to meet 20% of portfolio in bonds. Here is the complication in allocation and rebalancing, frequent re-figuring how much Russell 2500 to use.
Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio, modified as necessary to accommodate the fund offerings in your her 403b and his 457b. Current portfolio size = $170,891. New annual contributions = ????. The asset allocation is: 20% bonds; 25% international stocks; and 55% domestic stocks. The percentages given are percentages of the total portfolio, not of a given account. The suggestion is to switch both the existing balances and the new contributions to the funds indicated. All percentages are rounded off, so may not add up exactly. Sometimes I state 00% to indicate funds you might want to add in the future.
Her 403b thru TIAA CREF (47% of total; $79,842)
19%, Vanguard Institutional Index Fund Institutional Shares (a S&P 500 index fund) (VINIX) ER 0.04%
25%, Vanguard Total international Stock Index Fund Admiral Share (VTIAX) ER 0.11%
03%, TIAA Traditional;
His 457b thru NY State Deferred Compensation Plan (34% of total; $58,521)
26%, NYSDCB Equity Index Unitized Account (a S&P 500 index) E.R, 0.01%
00%, NYSDCB Russell 2500 Index Unitized Account ER, 0.02%
08%, NYSDCB US Debt Index Unitized Account ER, 0.02%
Roth IRA (19% of total; $32,528)
10%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
09%, Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05% (E fund, many would say not to count your emergency fund in your asset allocation, even if held in your Roth IRA.)
. . . . .
I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below.
If you have any questions just ask.
I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- sighchological
- Posts: 186
- Joined: Sat Feb 02, 2013 11:12 am
Re: Help w/ portfolio & w/ approximating stock market
Thanks ruralavalon for taking the time to write such a thorough response.
I read all the links that you recommended.
-------------------------------------------------------------------
Some questions regarding small caps:
1) I thought the NYSDCB Russell 2500 Index Unitized Account was only small cap, while the extended market included small cap and mid cap?
2) To approximate the stock market, instead of 81/19, wouldn’t it be the following 82/18 from the wiki "Approximating total stock market"?
(82% Vanguard 500 Index Fund (VFINX)
18% Vanguard Small-Cap Index Fund (NAESX)
In my case it would be
82% NYSDCB Equity Index Unitized Account
18% NYSDCB Russell 2500 Index Unitized Account
-------------------------------------------------------------------
3) Based on the links that you suggested, it seems like total stock market is slightly better than S&P….so shouldn't I keep the NYSDCB Equity Index Unitized Account in my portfolio since that is the only way I can include small caps?
4) Is there any way I can make rebalancing easy between small caps and S&P in my 457B and her 403B while having total stock market in my Roth IRA?
-------------------------------------------------------------------
5) Can I just approximate the stock market by combining:
82%:
NYSDCB Equity Index Unitized Account
(VINIX) Vanguard Institutional Index Fund Institutional Shares
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares;
18% NYSDCB Russell 2500 Index Unitized Account
6) This will cause me to tilt with small cap though, right?
-------------------------------------------------------------------
For the last 2 years my wife and I have maxed out our Roth IRA and our 457B/403b. So next year I hope to be able to contribute $48K.
Yes, we both have Roth IRA’s; my Roth IRA is the total stock market, her Roth IRA is the total bond.
I read all the links that you recommended.
-------------------------------------------------------------------
Some questions regarding small caps:
1) I thought the NYSDCB Russell 2500 Index Unitized Account was only small cap, while the extended market included small cap and mid cap?
2) To approximate the stock market, instead of 81/19, wouldn’t it be the following 82/18 from the wiki "Approximating total stock market"?
(82% Vanguard 500 Index Fund (VFINX)
18% Vanguard Small-Cap Index Fund (NAESX)
In my case it would be
82% NYSDCB Equity Index Unitized Account
18% NYSDCB Russell 2500 Index Unitized Account
-------------------------------------------------------------------
3) Based on the links that you suggested, it seems like total stock market is slightly better than S&P….so shouldn't I keep the NYSDCB Equity Index Unitized Account in my portfolio since that is the only way I can include small caps?
4) Is there any way I can make rebalancing easy between small caps and S&P in my 457B and her 403B while having total stock market in my Roth IRA?
-------------------------------------------------------------------
5) Can I just approximate the stock market by combining:
82%:
NYSDCB Equity Index Unitized Account
(VINIX) Vanguard Institutional Index Fund Institutional Shares
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares;
18% NYSDCB Russell 2500 Index Unitized Account
6) This will cause me to tilt with small cap though, right?
-------------------------------------------------------------------
For the last 2 years my wife and I have maxed out our Roth IRA and our 457B/403b. So next year I hope to be able to contribute $48K.
Yes, we both have Roth IRA’s; my Roth IRA is the total stock market, her Roth IRA is the total bond.
- ruralavalon
- Posts: 26297
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Help w/ portfolio & w/ approximating stock market
"A broad index featuring 2,500 stocks that cover the small and mid cap market capitalizations. The Russell 2500 is a market cap weighted index that includes the smallest 2,500 companies covered in the Russell 3000 universe of United States-based listed equities." Investopedia, "DEFINITION of 'Russell 2500 Index' ".sighchological wrote: ↑Wed Dec 13, 2017 10:06 pm Thanks ruralavalon for taking the time to write such a thorough response.
I read all the links that you recommended.
-------------------------------------------------------------------
Some questions regarding small caps:
1) I thought the NYSDCB Russell 2500 Index Unitized Account was only small cap, while the extended market included small cap and mid cap?
iShares Russell Small/Mid-Cap Index Fund (BSMAX) tracks the Russell 2500 index. Using Morningstar's "Instant x-ray" tool you can test any mix VFINX (S&P 500) and BSMAX (Russell 2500) to see what different ratios will give you.sighchological wrote: ↑Wed Dec 13, 2017 10:06 pm2) To approximate the stock market, instead of 81/19, wouldn’t it be the following 82/18 from the wiki "Approximating total stock market"?
(82% Vanguard 500 Index Fund (VFINX)
18% Vanguard Small-Cap Index Fund (NAESX)
In my case it would be
82% NYSDCB Equity Index Unitized Account
18% NYSDCB Russell 2500 Index Unitized Account
For comparison a total market index fund (VTSAX) gives this Morningstar style box:
23/24/25 -- large-cap
06/06/06 -- mid-cap
03/03/03 -- small-cap
. . . . .
It makes no real difference whether you use VFINX/BSMAX in a mix of 80/20, 81/19 or 82/18.
80/20 VFINX/BSMAX gives you:
22/23/24 -- large-cap
07/07/07 -- mid-cap
03/03/03 -- small-cap
81/19 VFINX/BSMAX gives you:
23/24/24 -- large-cap
07/07/07 -- mid-cap
03/03/03 -- small-cap
82/18 VFINX/BSMAX gives you:
23/24/24 -- large-cap
07/07/06 -- mid-cap
03/03/03 -- small-cap
You can also use "portfolio visualizer" to see very recent past performance of any mix of VFINX/BSMAX for the two years since the creation of BSMAX.
Over the 25 years since the creation of the first total stock market index fund it has done better by 0.11% per year.sighchological wrote: ↑Wed Dec 13, 2017 10:06 pm3) Based on the links that you suggested, it seems like total stock market is slightly better than S&P….so shouldn't I keep the NYSDCB Equity Index Unitized Account in my portfolio since that is the only way I can include small caps?
Performance differs at different times. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 25 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". Past performance is not a good predictor of future performance. Wiki article, "Callan periodic table of investment returns".
As before I don't say its wrong to add mid-cap and small-cap, I do feel that it's not necessary. Your concern was that your portfolio would be "more complicated to rebalance", and skipping the mid/small fund eliminates that complication in allocation and rebalancing.
sighchological wrote: ↑Wed Dec 13, 2017 10:06 pm4) Is there any way I can make rebalancing easy between small caps and S&P in my 457B and her 403B while having total stock market in my Roth IRA?
Many people (engineers, scientists, accountants etc.) use a spreadsheet.
I use pen, paper, and a cheap pocket calculator for rebalancing.
All of our accounts are at Vanguard and we use Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX), so don't have the problem of mixing S&P 500 and other funds trying to approximate the total stock market.
You need to specify a percentage for each of the four funds in order to have an answer.sighchological wrote: ↑Wed Dec 13, 2017 10:06 pm5) Can I just approximate the stock market by combining:
82%:
NYSDCB Equity Index Unitized Account
(VINIX) Vanguard Institutional Index Fund Institutional Shares
(VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares;
18% NYSDCB Russell 2500 Index Unitized Account
You need to specify a percentage for each of the four funds in order to have an answer.sighchological wrote: ↑Wed Dec 13, 2017 10:06 pm6) This will cause me to tilt with small cap though, right?
Good.sighchological wrote: ↑Wed Dec 13, 2017 10:06 pmFor the last 2 years my wife and I have maxed out our Roth IRA and our 457B/403b. So next year I hope to be able to contribute $48K.
Yes, we both have Roth IRA’s; my Roth IRA is the total stock market, her Roth IRA is the total bond.
Achieving a high rate of savings and contributions, and making full use of tax-advantaged accounts, is far more important that achieving the precise best allocation in domestic stocks.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy