VTI - Tracking?

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bmelikia
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VTI - Tracking?

Post by bmelikia »

I don't invest the VTI ETF but I do watch it's price occasionally to get a feel for how my mutual funds might behave that day. . .

Today seems odd because VTI is currently up +.19% and the markets are up the following:

S&P 500 +.33%
DOW +.67%
Nasdaq +.35%

I have always thought of the Total Stock Market Index to be an average of these items.

I would have figured VTI to be somewhere between .35% and .67% - anyone know why?
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle
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jason2459
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Re: VTI - Tracking?

Post by jason2459 »

bmelikia wrote: Fri Aug 21, 2020 2:50 pm I don't invest the VTI ETF but I do watch it's price occasionally to get a feel for how my mutual funds might behave that day. . .

Today seems odd because VTI is currently up +.19% and the markets are up the following:

S&P 500 +.33%
DOW +.67%
Nasdaq +.35%

I have always thought of the Total Stock Market Index to be an average of these items.

I would have figured VTI to be somewhere between .35% and .67% - anyone know why?
Midcap and small cap are in the red.
acegolfer
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Re: VTI - Tracking?

Post by acegolfer »

bmelikia wrote: Fri Aug 21, 2020 2:50 pm
S&P 500 +.33%
DOW +.67%
Nasdaq +.35%

I have always thought of the Total Stock Market Index to be an average of these items.
VTI doesn't track the average of these 3 indices. Instead, it tracks CRSP value weighted index, which consists of 3000+ stocks.
MotoTrojan
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Re: VTI - Tracking?

Post by MotoTrojan »

VTI is close to 80% S&P500 and 20% VB (CRSP Small-cap Index) which returned -0.37% today.

0.8 * 0.33 + 0.2 * -0.37 = 0.19.

The S&P500, DOW, and Nasdaq all have a lot of overlapping companies, they aren't unique separate entities.
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sarabayo
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Re: VTI - Tracking?

Post by sarabayo »

acegolfer wrote: Fri Aug 21, 2020 3:33 pm
bmelikia wrote: Fri Aug 21, 2020 2:50 pm
S&P 500 +.33%
DOW +.67%
Nasdaq +.35%

I have always thought of the Total Stock Market Index to be an average of these items.
VTI doesn't track the average of these 3 indices. Instead, it tracks CRSP value weighted index, which consists of 3000+ stocks.
To be precise, the name of the index it tracks is "CRSP US Total Market Index" (searchable by ticker symbol "CRSPTM1"). It is weighted by market capitalization; I'm not sure whether "value weighted" is a synonym of that, but a google search for "value weighted index" came up with some shady looking website which defines it differently (I guess it's based on "value" in the sense of price vs fundamentals or something).

According to Google, CRSPTM1 is up 0.22% today, and VTI is up 0.25% today.
MotoTrojan
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Re: VTI - Tracking?

Post by MotoTrojan »

sarabayo wrote: Fri Aug 21, 2020 4:06 pm
acegolfer wrote: Fri Aug 21, 2020 3:33 pm
bmelikia wrote: Fri Aug 21, 2020 2:50 pm
S&P 500 +.33%
DOW +.67%
Nasdaq +.35%

I have always thought of the Total Stock Market Index to be an average of these items.
VTI doesn't track the average of these 3 indices. Instead, it tracks CRSP value weighted index, which consists of 3000+ stocks.
To be precise, the name of the index it tracks is "CRSP US Total Market Index" (searchable by ticker symbol "CRSPTM1"). It is weighted by market capitalization; I'm not sure whether "value weighted" is a synonym of that, but a google search for "value weighted index" came up with some shady looking website which defines it differently (I guess it's based on "value" in the sense of price vs fundamentals or something).

According to Google, CRSPTM1 is up 0.22% today, and VTI is up 0.25% today.
Value-weighted (VW) is a phrase often used in some settings for market-cap weighted, but it has always confused me because those settings are often academic type papers I read about value-factor funds, so my mind presumes it is weighted by cheapness :D.
alluringreality
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Re: VTI - Tracking?

Post by alluringreality »

Vanguard has a graphic that approximates how their ETFs compare to the complete market. For example VTI and VOO track different indexes and cover different portions of the US market. VOO would be expected to track closer to the S&P 500 than VTI. Etfrc.com also includes an overlap by weight to roughly compare two ETFs.
https://advisors.vanguard.com/VGApp/iip ... ssizestyle
https://www.etfrc.com/funds/overlap.php
Last edited by alluringreality on Fri Aug 21, 2020 4:32 pm, edited 1 time in total.
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bmelikia
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Re: VTI - Tracking?

Post by bmelikia »

Awesome - thank you everyone for the responses. . .I am a little bit wiser today!
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JoMoney
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Re: VTI - Tracking?

Post by JoMoney »

If you get the "Russell 2000" quote wherever it is you get your quotes, you'd be better off considering VTI as something like 80% S&P 500 , 20% Russell 2000
The Dow 30 and the NASDAQ have a lot of sector and idiosyncratic differences that often deviate quite a bit.
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Dominic
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Re: VTI - Tracking?

Post by Dominic »

bmelikia wrote: Fri Aug 21, 2020 2:50 pm I don't invest the VTI ETF but I do watch it's price occasionally to get a feel for how my mutual funds might behave that day. . .

Today seems odd because VTI is currently up +.19% and the markets are up the following:

S&P 500 +.33%
DOW +.67%
Nasdaq +.35%

I have always thought of the Total Stock Market Index to be an average of these items.

I would have figured VTI to be somewhere between .35% and .67% - anyone know why?
There is significant overlap in these indices. All companies in the Dow are in the S&P 500, and most of the NASDAQ companies are in the S&P 500. The Dow is price-weighted and only samples 30 stocks, which is why it often behaves differently than the S&P. The NASDAQ is almost entirely tech stocks, which is why it's also very different from the S&P.

The US market is roughly 80% S&P 500, and the rest is in mid/small cap stocks that don't show up in the other major indices. The Russell 2000 or S&P 400 (mid cap) with the S&P 600 (small cap) can give you an idea of how those behaved.
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sarabayo
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Re: VTI - Tracking?

Post by sarabayo »

Dominic wrote: Fri Aug 21, 2020 4:46 pm The Dow is price-weighted and only samples 30 stocks, which is why it often behaves differently than the S&P.
One might go even further and say that that is why it is pretty useless as a measure of the behavior of the stock market as a whole. I don't understand why anyone even cares about the DJIA anymore. If not for its long history, the DJIA would look like just another harebrained active management strategy, except the stock picker happens to be S&P Dow Jones Indices LLC which has the word "Indices" in its name.
mrmatter
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Re: VTI - Tracking?

Post by mrmatter »

:) @ the "active management indices" ... true... funny

on another note ... Is there a VG index fund that tracks the DJIA?
acegolfer
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Re: VTI - Tracking?

Post by acegolfer »

sarabayo wrote: Fri Aug 21, 2020 8:44 pm
Dominic wrote: Fri Aug 21, 2020 4:46 pm The Dow is price-weighted and only samples 30 stocks, which is why it often behaves differently than the S&P.
One might go even further and say that that is why it is pretty useless as a measure of the behavior of the stock market as a whole. I don't understand why anyone even cares about the DJIA anymore. If not for its long history, the DJIA would look like just another harebrained active management strategy, except the stock picker happens to be S&P Dow Jones Indices LLC which has the word "Indices" in its name.
Correct, DJIA's popularity is primarily due to its long history. Another reason why I think it's popular is financial media. DJIA dropped 1000 pts is more catchy than SP500 dropped 100 pts.
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FIREchief
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Re: VTI - Tracking?

Post by FIREchief »

mrmatter wrote: Sat Aug 22, 2020 1:34 am :) @ the "active management indices" ... true... funny

on another note ... Is there a VG index fund that tracks the DJIA?
The DJIA is not an index, so the answer would have to be "no."
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
MotoTrojan
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Re: VTI - Tracking?

Post by MotoTrojan »

FIREchief wrote: Sat Aug 22, 2020 10:47 am
mrmatter wrote: Sat Aug 22, 2020 1:34 am :) @ the "active management indices" ... true... funny

on another note ... Is there a VG index fund that tracks the DJIA?
The DJIA is not an index, so the answer would have to be "no."
INDEXDJX: .DJI
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FIREchief
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Re: VTI - Tracking?

Post by FIREchief »

MotoTrojan wrote: Sat Aug 22, 2020 11:10 am
FIREchief wrote: Sat Aug 22, 2020 10:47 am
mrmatter wrote: Sat Aug 22, 2020 1:34 am :) @ the "active management indices" ... true... funny

on another note ... Is there a VG index fund that tracks the DJIA?
The DJIA is not an index, so the answer would have to be "no."
INDEXDJX: .DJI
Well it's not a "real" index. :P
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
acegolfer
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Re: VTI - Tracking?

Post by acegolfer »

FIREchief wrote: Sat Aug 22, 2020 11:27 am
MotoTrojan wrote: Sat Aug 22, 2020 11:10 am
FIREchief wrote: Sat Aug 22, 2020 10:47 am
mrmatter wrote: Sat Aug 22, 2020 1:34 am :) @ the "active management indices" ... true... funny

on another note ... Is there a VG index fund that tracks the DJIA?
The DJIA is not an index, so the answer would have to be "no."
INDEXDJX: .DJI
Well it's not a "real" index. :P
What is the definition for "real" index?
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FIREchief
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Re: VTI - Tracking?

Post by FIREchief »

acegolfer wrote: Sat Aug 22, 2020 11:42 am
FIREchief wrote: Sat Aug 22, 2020 11:27 am
MotoTrojan wrote: Sat Aug 22, 2020 11:10 am
FIREchief wrote: Sat Aug 22, 2020 10:47 am
mrmatter wrote: Sat Aug 22, 2020 1:34 am :) @ the "active management indices" ... true... funny

on another note ... Is there a VG index fund that tracks the DJIA?
The DJIA is not an index, so the answer would have to be "no."
INDEXDJX: .DJI
Well it's not a "real" index. :P
What is the definition for "real" index?
There probably isn't a universally accepted definition in this realm, but I would consider market cap weighting to be a key factor. If you want to consider the DJIA as an "index," go right ahead! It's a free Country. 8-)
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.
MotoTrojan
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Re: VTI - Tracking?

Post by MotoTrojan »

FIREchief wrote: Sat Aug 22, 2020 11:50 am
acegolfer wrote: Sat Aug 22, 2020 11:42 am
FIREchief wrote: Sat Aug 22, 2020 11:27 am
MotoTrojan wrote: Sat Aug 22, 2020 11:10 am
FIREchief wrote: Sat Aug 22, 2020 10:47 am

The DJIA is not an index, so the answer would have to be "no."
INDEXDJX: .DJI
Well it's not a "real" index. :P
What is the definition for "real" index?
There probably isn't a universally accepted definition in this realm, but I would consider market cap weighting to be a key factor. If you want to consider the DJIA as an "index," go right ahead! It's a free Country. 8-)
There are thousands of indexes out there for exotic products such as DFA funds, Alpha Architect ETFs are based on an in-house index, there are even some for leveraged products like Pimco's StocksPLUS products (100% equity exposure plus various active bonds and short cash). An index is simply a rules-based/systematic portfolio generally without any trading/expense-costs which can be used as a reference for all sorts of products that either intend to track them directly, or often use them as a more representative benchmark (so no product even exists that actually holds the index). Can also be a way to public backtested results for new products.

I do agree the DJIA is a poor methodology which has returns similar to market-cap weight but with much less efficient construction for a number of reasons (turn-over now with the AAPL split for example).
whereskyle
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Re: VTI - Tracking?

Post by whereskyle »

bmelikia wrote: Fri Aug 21, 2020 2:50 pm I don't invest the VTI ETF but I do watch it's price occasionally to get a feel for how my mutual funds might behave that day. . .

Today seems odd because VTI is currently up +.19% and the markets are up the following:

S&P 500 +.33%
DOW +.67%
Nasdaq +.35%

I have always thought of the Total Stock Market Index to be an average of these items.

I would have figured VTI to be somewhere between .35% and .67% - anyone know why?
When you're looking at cnbc's website, I think a fair approximation is assigning 75% weight to the sp 500 and 25% at the Russell 2000 (The smallest 2000 companies in the Russell 3000 index, which is made up of the 3000 biggest stocks by market cap in the US).

VTI includes far more stocks than any of the mentioned indices. The SP 500 represents the top 3/4 of the US market and the Russell 2000 represents the bottom 1/4 or so. It's not perfect, but the formula above is a pretty accurate reflection of VTI's performance.
Last edited by whereskyle on Sat Aug 22, 2020 4:43 pm, edited 1 time in total.
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ruud
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Re: VTI - Tracking?

Post by ruud »

mrmatter wrote: Sat Aug 22, 2020 1:34 am on another note ... Is there a VG index fund that tracks the DJIA?
There isn't a Vanguard fund, but there is an ETF from another fund company that tracks it: DIA.

(Or you could just buy an equal number of shares in each of the 30 constituent stocks)
.
mrmatter
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Re: VTI - Tracking?

Post by mrmatter »

Thanks, Ruud
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sarabayo
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Re: VTI - Tracking?

Post by sarabayo »

MotoTrojan wrote: Sat Aug 22, 2020 12:13 pm There are thousands of indexes out there for exotic products such as DFA funds, Alpha Architect ETFs are based on an in-house index, there are even some for leveraged products like Pimco's StocksPLUS products (100% equity exposure plus various active bonds and short cash). An index is simply a rules-based/systematic portfolio generally without any trading/expense-costs which can be used as a reference for all sorts of products that either intend to track them directly, or often use them as a more representative benchmark (so no product even exists that actually holds the index). Can also be a way to public backtested results for new products.

I do agree the DJIA is a poor methodology which has returns similar to market-cap weight but with much less efficient construction for a number of reasons (turn-over now with the AAPL split for example).
(Emphasis above mine.)

What is "rules-based/systematic" about the DJIA's methodology? I wasn't aware they had any particular rules about what companies they chose to put in the DJIA. I suppose that adjustments of the "Dow Divisor" monkey-patch are dictated by the need to keep the value of the index continuous, so that's sort of systematic in a way...
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Re: VTI - Tracking?

Post by MotoTrojan »

sarabayo wrote: Sat Aug 22, 2020 2:27 pm
MotoTrojan wrote: Sat Aug 22, 2020 12:13 pm There are thousands of indexes out there for exotic products such as DFA funds, Alpha Architect ETFs are based on an in-house index, there are even some for leveraged products like Pimco's StocksPLUS products (100% equity exposure plus various active bonds and short cash). An index is simply a rules-based/systematic portfolio generally without any trading/expense-costs which can be used as a reference for all sorts of products that either intend to track them directly, or often use them as a more representative benchmark (so no product even exists that actually holds the index). Can also be a way to public backtested results for new products.

I do agree the DJIA is a poor methodology which has returns similar to market-cap weight but with much less efficient construction for a number of reasons (turn-over now with the AAPL split for example).
(Emphasis above mine.)

What is "rules-based/systematic" about the DJIA's methodology? I wasn't aware they had any particular rules about what companies they chose to put in the DJIA. I suppose that adjustments of the "Dow Divisor" monkey-patch are dictated by the need to keep the value of the index continuous, so that's sort of systematic in a way...
By that argument you could say the S&P500 is not an index then. Do they have inclusion rules? Yes, but I still believe the committee has final subjective say. Another example would be what countries are included in various international funds, how A shares are treated, etc... which is subjectively decided on and then from that point operates systemically.

AAPL is splitting and the DJIA will systematically adjust it's weight per it's methodology.
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