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The 4 Pillars - a question
Old 05-24-2005, 04:39 PM   #1
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The 4 Pillars - a question

I am plowing through Bernstein's book and I have many questions, but I'll just ask one now. He gives a sample portfolio that starts with 35% U.S. stock market (the "total market," not just the S&P 500). What is the difference? What in Vanguard would give me the total market?

Thanks!
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Re: The 4 Pillars - a question
Old 05-24-2005, 05:03 PM   #2
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Re: The 4 Pillars - a question

If you are looking at the "total" US Stock Market, Vanguard offers the Vanguard Index Total Stock Market Fund (VTSMX).*

I've used the Vanguard Vipers (VTI) ETF to give me exposure to the "total US market".

Hope this helps.

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Re: The 4 Pillars - a question
Old 05-24-2005, 05:09 PM   #3
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Re: The 4 Pillars - a question

As to the difference, the 500 are all large cap stocks while the TMI contains mid and small caps in about 25% of its make-up.
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Re: The 4 Pillars - a question
Old 05-24-2005, 07:17 PM   #4
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Re: The 4 Pillars - a question

OK, thanks. I see the difference. I'll check out those 2 funds.
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Re: The 4 Pillars - a question
Old 05-24-2005, 07:24 PM   #5
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Re: The 4 Pillars - a question

The correlation and return between the S&P500 and total market is very, very close despite a minor difference in composition.
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Re: The 4 Pillars - a question
Old 05-24-2005, 07:47 PM   #6
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Re: The 4 Pillars - a question

Quote:
Originally Posted by Spanky
The correlation and return between the S&P500 and total market is very, very close despite a minor difference in composition.
It points out the huge weight that the biggest 20 or so 'megacaps' have on all the US indices that include them. I don't go for the Total cap weighted indexes, but slice up and index the small (either microcap or small -- the smallest 4% or 12% or so of U.S. stocks) and large, with value tilts on both. It overweights small vis-a-vis their capitalization, but my goal is to have a portfolio whose slices interact well together to reduce volatility at an acceptable yield, not to 'own the market' in the same proportions that everyone else does. Basically, it's Modern Portfolio Theory, with a smidgen of Efficient Frontier thinking tossed in for spice.
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Re: The 4 Pillars - a question
Old 05-24-2005, 07:54 PM   #7
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Re: The 4 Pillars - a question

Quote:
Originally Posted by ESRBob
It points out the huge weight that the biggest 20 or so 'megacaps' have on all the US indices that include them.* I don't go for the Total cap weighted indexes, but slice up and index the small (either microcap or small -- the smallest 4% or 12% or so of U.S. stocks) and large, with value tilts on both.*
And.... away we go! Anyone care to start up the "value premium" debate for smooch?
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Re: The 4 Pillars - a question
Old 05-25-2005, 01:45 PM   #8
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Re: The 4 Pillars - a question

Nords, quck, I'm sure you can put together an eloquent synopsis and head that off!
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Re: The 4 Pillars - a question
Old 05-25-2005, 03:21 PM   #9
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Re: The 4 Pillars - a question

I'm not Nords, but I could play him in a made-for-tv movie if I have some time to take a few surfing lessons and dust off my tae kwon do skills.

Bad stocks are good to own. Good stocks are bad to own. Bad stocks really arent that bad and pay good dividends. Much of historical returns consist of good dividends. Good stocks arent really that good and dont pay dividends. See the part about most historical returns consisting of dividends. Good stocks dont usually stay good stocks for long.

Value has higher volatility, but a higher income stream meaning you need to sell shares less frequently.

TSM has a slightly lower return than the s&p500 with slightly less volatility, over long periods of time.

Owning half s&p500 and half "vanguard extended market" gives you more of a balance of large cap with mid/small cap.

Owning large and small cap value indexes or cheap managed funds gives you high income, good appreciation, and higher long term portfolio values and safe withdrawal rates.
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Re: The 4 Pillars - a question
Old 05-25-2005, 04:58 PM   #10
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Re: The 4 Pillars - a question

TH,

I actually recognize most of that from the book. I have it from the library now, but I'm going to purchase it, because I'll definately need a second reading. I called Vanguard today for forms to start the moving process. This board has soooo much good information!
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Re: The 4 Pillars - a question
Old 05-25-2005, 05:04 PM   #11
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Re: The 4 Pillars - a question

If you do a search on "book report four pillars" I wrote a lengthy synopsis and we had some discussion around it, might be helpful for those who dont want to go through the whole read
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Re: The 4 Pillars - a question
Old 05-25-2005, 07:21 PM   #12
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Re: The 4 Pillars - a question

Quote:
Originally Posted by You dont know me
If you do a search on "book report four pillars" I wrote a lengthy synopsis and we had some discussion around it, might be helpful for those who dont want to go through the whole read
Just read your book report and I give it an A-. Well done. Help me with one question which I'm sure is dumb:

Buy a portfolio consisting of 60% total stock market and 40% short term corporate or short term bond index, perhaps moving some towards intermediate bonds over time to take advantage of rising interest rates while protecting yourself from short term interest rate risk. Add 5-10% reits, 5-10% foreign stocks, 10-20% small cap and large cap value stocks, 3-5% emerging market stocks, 3-5% foreign bonds, and/or 3% precious metals to reduce volatility, increase returns, and give yourself something to do.

I assume that the 5-10% REITS.....etc is a portion of the 60% equities So if I take the lower end of each range, I might have 30% in REITS, foreign, small cap etc, 30% in total market equities and 40% ST bonds Is that the idea?

Thanks. You guys are good.
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Re: The 4 Pillars - a question
Old 05-25-2005, 08:16 PM   #13
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Re: The 4 Pillars - a question

Quote:
Originally Posted by You dont know me
If you do a search on "book report four pillars" I wrote a lengthy synopsis and we had some discussion around it, might be helpful for those who dont want to go through the whole read
I don't care to read the book or the synopsis.

JG
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Re: The 4 Pillars - a question
Old 05-26-2005, 01:17 PM   #14
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Re: The 4 Pillars - a question

I'd rather you didnt anyway.
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Re: The 4 Pillars - a question
Old 05-26-2005, 07:58 PM   #15
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Re: The 4 Pillars - a question

Quote:
Originally Posted by Arin38
I assume that the 5-10% REITS.....etc is a portion of the 60% equities So if I take the lower end of each range, I might have 30% in REITS, foreign, small cap etc, 30% in total market equities and 40% ST bonds Is that the idea?
Berstein's 60/40 Portfolio:
Large Vanguard 500 Index VFINX 12.0%
Large Value Vanguard Value Index VIVIX 15.0%
Small Vanguard Small Index NAESX 3.0%
Small Value Vanguard Small Value Index (IRA) VISVX 9.0%
Real Estate Vanguard REIT VGSIX 6.0%
Small Value Vanguard Precious Metals VGPIX 1.8%
Small Value Vanguard European Stock Index VESIX 3.0%
Small Value Vanguard Pacific Stock Index VPACX 3.0%
Emerging Markets Vanguard Emerg Mkt Stk Idx VEIEX 3.0%
Small Value Vanguard International Value VTRIX 4.2%
Bonds fixed-income% is 40%
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Re: The 4 Pillars - a question
Old 05-29-2005, 11:48 AM   #16
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Re: The 4 Pillars - a question

Quote:
Originally Posted by Grand Banks
If you do a search on "book report four pillars" I wrote a lengthy synopsis and we had some discussion around it, might be helpful for those who dont want to go through the whole read
Read the whole thing in one sitting................
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Re: The 4 Pillars - a question
Old 05-29-2005, 12:43 PM   #17
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Re: The 4 Pillars - a question

The book or the synopsis?

If you read the entire book in one sitting without losing your will to live or developing narcolepsy, I am most impressed!
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Re: The 4 Pillars - a question
Old 05-29-2005, 01:54 PM   #18
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Re: The 4 Pillars - a question

I feel that way about most "popular" means of entertainment, like reality TV and/or hip-hop...

BTW, the book!
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Re: The 4 Pillars - a question
Old 05-29-2005, 03:59 PM   #19
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Re: The 4 Pillars - a question

I read the book report. Thanks, it was very well done. I need to read the book again, but now I'm into "John Bogle on Investing". I'm sure I'll need to read that slowly.
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