Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Real allocation of total stock index
Old 08-20-2006, 09:07 AM   #1
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Real allocation of total stock index

I'm having trouble sorting out just how a fund like Vanguard Total Stock Market index is really allocated. I understand that it is skewed by its objectives toward large cap growth, but just how would it break down in terms of Value, Growth, Small and Large?

The questions behind my question are a) whether I really need to slice into those 4 categories to get decent diversification, or is the Total Stock Index reasonable proxy for that? If it's closer to the S&P 500, I'll slice and dice; and b) if not, is there a fund that specifically does that specific task for me -- i.e. maintains a specific balance among these categories. Trying to simplify my plans.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Real allocation of total stock index
Old 08-20-2006, 10:25 AM   #2
Full time employment: Posting here.
 
Join Date: Feb 2004
Location: Okanagan Valley
Posts: 808
Re: Real allocation of total stock index

Per Vanguard's website, the VTI benchmark was the Wilshire 5000 index through Apr 22, 05 and is now the MSCI US Broad Market Index since that time. In that case, there is no skew to Value, or Growth.

Quote from Vanguard:
Quote:
The fund typically holds the largest 1,200–1,300 stocks in its target index (covering nearly 95% of the index’s total market capitalization) and a representative sample of the remaining stocks. The fund holds a range of securities that, in the aggregate, approximates the full index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield.
I've been told that you would need to add VXF (Extended Market ETF) to get the whole picture (small and mid-caps in everything but the S&P500). Again no skew to Value or Growth, but it covers the small caps VTI doesn't.

Quote from Vanguard:
Quote:
designed to track the performance of the Standard & Poor’s Completion Index, a broadly diversified index of stocks of small and medium-sized U.S. companies. The Standard & Poor’s Completion Index contains all of the U.S. common stocks regularly traded on the New York and American Stock Exchanges and the Nasdaq over-the-counter market, except those stocks included in the Standard & Poor’s 500 Index. The fund invests all, or substantially all, of its assets in stocks of its target index, with nearly 80% of its assets invested in the 1,200 largest stocks in its target index (covering nearly 80% of the index’s total market capitalization), and the rest of its assets in a representative sample of the remaining stocks. The fund holds a broadly diversified collection of securities that, in the aggregate, approximates the full index in terms of key characteristics. These key characteristics include industry weightings and market capitalization, as well as certain financial measures, such as price/earnings ratio and dividend yield.

IMHO, you would want both to capture the entire market.
AltaRed is offline   Reply With Quote
Re: Real allocation of total stock index
Old 08-20-2006, 10:29 AM   #3
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,856
Re: Real allocation of total stock index

Quote:
Originally Posted by Rich_in_Tampa
I'm having trouble sorting out just how a fund like Vanguard Total Stock Market index is really allocated. I understand that it is skewed by its objectives toward large cap growth, but just how would it break down in terms of Value, Growth, Small and Large?
Several years ago it was noted that the collective returns of the three funds S&P500, S&P400, & S&P600 outperformed the TSM represented by the S&P1500.

I don't know if that's consistently been the case or if it was just a short-term phenomenon.

I've also read that the total stock market is at least 70% large cap, but that depends on your definition of the "large" category.
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Re: Real allocation of total stock index
Old 08-20-2006, 04:28 PM   #4
Full time employment: Posting here.
 
Join Date: Apr 2005
Posts: 524
Re: Real allocation of total stock index

Last time I checked (about a year ago) the allocation of VTSMX by market cap was as follows.

Large (>5B) 65%
Mid (1B-5B) 25%
Small (<1B) 10%
JB is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Buckets of Money Strategy AlanS FIRE and Money 46 02-20-2012 05:49 AM
Short Term Allocation Question firedude FIRE and Money 1 01-08-2007 03:45 PM
Vanguard Emerging Markets Stock Index smooch FIRE and Money 16 01-06-2006 08:33 AM
Asset Allocation Adjustment ferco FIRE and Money 8 08-09-2005 06:21 PM
Great DFA vs Vanguard Analysis in Index Investor ESRBob FIRE and Money 2 12-10-2004 07:03 PM

» Quick Links

 
All times are GMT -6. The time now is 06:27 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.