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it could be but it is not a complete portfolio of diversified assets. in fact the entire fund is moved by only the top 50 holdings. you may want more diversification than that , i know i would.
It would certainly be wise to have it as part of the portfolio. I wouldn't go too diversified, with many funds with many stocks, but not just one fund with many stocks either. It dilutes risk and dilutes return.
My Vanguard account has 3 funds over 6 months with an average of 25.85% return (VTSAX, VDAIX, VWELX). I have a few accounts based on what they are holding (403b, rollovers, and speculation). It's done much better then my TIAA Cref account in the same period.
it could be but it is not a complete portfolio of diversified assets. in fact the entire fund is moved by only the top 50 holdings. you may want more diversification than that , i know i would.
What's your source of VTSMX is moved by "only" the top 50 holdings? This is incorrect.
If you are looking for a low cost index fund tracking CRSP US Total Market Index (value weighted index of 3,642 U.S. stocks), VTSMX will be the right choice with ER = 0.17%. It's the largest mutual fund in U.S.
Once your balance reaches $10k, you can even lower the cost by converting to VTSAX (admiral shares, ER = 0.05%) without any tax implication.
If you are looking for ETF instead, then use VTI (which is basically the same as VTSMX).
Once you decide to invest in VTSMX, do all the transactions at vanguard.com to avoid any transaction fees that are imposed by brokerages.
Last edited by acegolfer; 06-14-2014 at 05:10 AM..
What's your source of VTSMX is moved by "only" the top 50 holdings? This is incorrect.
my source? common data.
the top 45 stocks are worth as much in market cap as the entire rest of the index. that means the top 50 stocks control more of where the index goes than the other 450.
THE S&P 100 represents almost 60% % of the entire s&p 500. in fact the s&p 500 accounts for 75% of the entire movement of the wilshire 5000 giving those top 50 stocks incredible weighting in a total market fund.
you can google it if you want .
for anyone who wants a real total market investment your best bet is mix an s&p 500 fund with an extended market fund. the extended market funds are very different from a total market fund.
most of the time there is less than 1% difference between a total market fund and an s&p 500 fund.
the extended market funds are the wilshire 5000 less the s&p 500 stocks, they exist just because of the reasons above. .
Last edited by mathjak107; 06-14-2014 at 11:55 AM..
Why do folks presumably choose a total market fund over an S&P 500 fund? For the extra diversity & exposure to small & midcaps, right? But what many don't get is that the exposure is so small that it has virtually no effect. It's near-meaningless.
So a better option, as Math pointed out, is to go with an S&P 500 fund AND a separate mid/smallcap fund. That will allow you to have MEANINGFUL exposure to the smaller cap stocks, in the proportion you choose.
the top 45 stocks are worth as much in market cap as the entire rest of the index. that means the top 50 stocks control more of where the index goes than the other 450.
THE S&P 100 represents almost 60% % of the entire s&p 500. in fact the s&p 500 accounts for 75% of the entire movement of the wilshire 5000 giving those top 50 stocks incredible weighting in a total market fund.
you can google it if you want .
for anyone who wants a real total market investment your best bet is mix an s&p 500 fund with an extended market fund. the extended market funds are very different from a total market fund.
most of the time there is less than 1% difference between a total market fund and an s&p 500 fund.
the extended market funds are the wilshire 5000 less the s&p 500 stocks, they exist just because of the reasons above. .
You stated that "VTSMX is moved by "only" the top 50 holdings."
And you just proved you are wrong.
1. If top 45 stocks are worth as the rest of the index, top 50 cannot account for 100% of the market.
2. If S&P500 accounts for 75% of the wilshire 5000, how can top 50 holdings account for 100% of the market cap?
I googled it and couldn't find any proof that VTSMX is moved by "only" the top 50 holdings. Can you show me?
I agree that there's is less than 1% difference between TSM and 500. But the difference is not zero.
Last edited by acegolfer; 06-14-2014 at 12:57 PM..
Why do folks presumably choose a total market fund over an S&P 500 fund? For the extra diversity & exposure to small & midcaps, right? But what many don't get is that the exposure is so small that it has virtually no effect. It's near-meaningless.
So a better option, as Math pointed out, is to go with an S&P 500 fund AND a separate mid/smallcap fund. That will allow you to have MEANINGFUL exposure to the smaller cap stocks, in the proportion you choose.
Because total market fund is more diversified. You must be thinking that S&P500 is identical to CRSP US VW Market Index. Of course, they move similar. But they don't move 1:1. If you think otherwise, show me the proof.
Do you know what % the S&P500 account for the CRSP US VW Market Index? Google it.
I agree that the exposure of mid and small cap is small but it is not zero. It has some (but small) effect on the total.
I'm not trying to convince you that TSM is better than 500. That's a whole another topic. But I'm stating the fact that TSM is more diversed than 500. They are not identical.
Last edited by acegolfer; 06-14-2014 at 12:53 PM..
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