Help replicating TSM in 401k

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Bluemnatra
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Help replicating TSM in 401k

Post by Bluemnatra »

I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
"The greatest enemy of a good plan is the dream of a perfect plan"
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retired@50
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Re: Help replicating TSM in 401k

Post by retired@50 »

Bluemnatra wrote: Wed Sep 22, 2021 12:38 pm I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
I'd put 80% in the S&P 500 fund and 20% in the Small-Cap blend fund (TISBX).

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Silk McCue
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Re: Help replicating TSM in 401k

Post by Silk McCue »

I'd go with the TISBX in an 80/20 ratio.

This was a similar question from a couple of years ago with knowledgeable members.

viewtopic.php?t=285336

Cheers
Marseille07
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Re: Help replicating TSM in 401k

Post by Marseille07 »

I wouldn't bother and just hold the 500 index fund.

I actually have the opposite problem where one of the 401Ks only offers US TSM when I want S&P500. I'm 100% US TSM there.
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David Jay
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Re: Help replicating TSM in 401k

Post by David Jay »

Silk McCue wrote: Wed Sep 22, 2021 12:48 pm I'd go with the TISBX in an 80/20 ratio.
+2
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arcticpineapplecorp.
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Re: Help replicating TSM in 401k

Post by arcticpineapplecorp. »

Silk McCue wrote: Wed Sep 22, 2021 12:48 pm I'd go with the TISBX in an 80/20 ratio.

This was a similar question from a couple of years ago with knowledgeable members.

viewtopic.php?t=285336

Cheers
this is the best way if you are trying to replicate the market.

read more here:
https://www.bogleheads.org/wiki/Approxi ... ock_market

it's also what I do in my Roth 457b for what it's worth.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
Bluemnatra
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Re: Help replicating TSM in 401k

Post by Bluemnatra »

Thanks everyone!
"The greatest enemy of a good plan is the dream of a perfect plan"
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ruralavalon
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Re: Help replicating TSM in 401k

Post by ruralavalon »

Bluemnatra wrote: Wed Sep 22, 2021 12:38 pm I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
Either the S&P 500 index fund itself or about 80% in the S&P 500 fund and 20% in the TIAA-CREF Small-Cap blend index fund (TISBX) would be reasonable in my opinion.

I would simply use just the S&P 500 index fund itself. That covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies.

In the 29 years since the creation of the first total stock market index fund the two types of funds have had almost identical performance. Sometimes one type was a little bit ahead, sometimes the other. Portfolio Visualizer, 1993-2021. Adding a little small-cap and a little more mid-cap hasn't had much if any impact.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Bluemnatra
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Re: Help replicating TSM in 401k

Post by Bluemnatra »

ruralavalon wrote: Wed Sep 22, 2021 1:59 pm
Bluemnatra wrote: Wed Sep 22, 2021 12:38 pm I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
Either the S&P 500 index fund itself or about 80% in the S&P 500 fund and 20% in the TIAA-CREF Small-Cap blend index fund (TISBX) would be reasonable in my opinion.

I would simply use just the S&P 500 index fund itself. That covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies.

In the 29 years since the creation of the first total stock market index fund the two types of funds have had almost identical performance. Sometimes one type was a little bit ahead, sometimes the other. Portfolio Visualizer, 1993-2021. Adding a little small-cap and a little more mid-cap hasn't had much if any impact.
Does it matter at all that the 500 index fund in my plan has an ER of 0.3% and the TIAA-CREF has an ER of 0.06%?
"The greatest enemy of a good plan is the dream of a perfect plan"
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anon_investor
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Re: Help replicating TSM in 401k

Post by anon_investor »

Bluemnatra wrote: Wed Sep 22, 2021 2:11 pm
ruralavalon wrote: Wed Sep 22, 2021 1:59 pm
Bluemnatra wrote: Wed Sep 22, 2021 12:38 pm I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
Either the S&P 500 index fund itself or about 80% in the S&P 500 fund and 20% in the TIAA-CREF Small-Cap blend index fund (TISBX) would be reasonable in my opinion.

I would simply use just the S&P 500 index fund itself. That covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies.

In the 29 years since the creation of the first total stock market index fund the two types of funds have had almost identical performance. Sometimes one type was a little bit ahead, sometimes the other. Portfolio Visualizer, 1993-2021. Adding a little small-cap and a little more mid-cap hasn't had much if any impact.
Does it matter at all that the 500 index fund in my plan has an ER of 0.3% and the TIAA-CREF has an ER of 0.06%?
What other funds do you have available in your 401k?
TropikThunder
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Re: Help replicating TSM in 401k

Post by TropikThunder »

Bluemnatra wrote: Wed Sep 22, 2021 12:38 pm I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
Others have given good responses, I just wanted to add something. This is a pet peeve of mine and one of the issues with having poorly informed plan committees and/or advisors. Or maybe they’re not poorly informed, they’re doing it on purpose? Who knows!

But the issue is providing fund selections that mix index providers. An S&P500 fund The S&P500 index is (obviously) run by S&P, and it contains (obviously) the biggest 500 companies (not exactly but you know what I mean). So a plan should then offer a small cap from the same index provider, right? S&P makes mid cap and small cap indexes. Several mutual fund companies provide completion indexes that are mid and small combined (VEXMX for example).

But instead, OP’s plan includes a small cap that follows a completely different index: TISBX follows the Russell 2000 index, which is a partner for the Russell 1000 Large Cap. If you want to split out Large Cap vs the rest, you can use a Russell 1000 large cap fund (which TIAA also provides) plus TISBX. But if you’re starting with an S&P500 fund and you use TISBX as you completion index, you’re omitting #’s 500-1,000. Is that a huge deal? No, but it’s totally avoidable.
Last edited by TropikThunder on Wed Sep 22, 2021 2:36 pm, edited 1 time in total.
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ruralavalon
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Re: Help replicating TSM in 401k

Post by ruralavalon »

Bluemnatra wrote: Wed Sep 22, 2021 2:11 pm
ruralavalon wrote: Wed Sep 22, 2021 1:59 pm
Bluemnatra wrote: Wed Sep 22, 2021 12:38 pm I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
Either the S&P 500 index fund itself or about 80% in the S&P 500 fund and 20% in the TIAA-CREF Small-Cap blend index fund (TISBX) would be reasonable in my opinion.

I would simply use just the S&P 500 index fund itself. That covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies.

In the 29 years since the creation of the first total stock market index fund the two types of funds have had almost identical performance. Sometimes one type was a little bit ahead, sometimes the other. Portfolio Visualizer, 1993-2021. Adding a little small-cap and a little more mid-cap hasn't had much if any impact.
Does it matter at all that the 500 index fund in my plan has an ER of 0.3% and the TIAA-CREF has an ER of 0.06%?
No. Not my opinion. Low expense ratios are important. Both funds have very low expense ratios.

A difference of a few hundredths of a percent will likely have little or no impact. The differences in fund composition, stocks covered, turnover, future economic climate, etc can easily outweigh a tiny difference in expense ratios.

The linked information I gave for 1993-2021 is total return, with dividends reinvested, net of expenses. In other words cost of the expense ratios is already subtracted from all the performance numbers.
Last edited by ruralavalon on Wed Sep 22, 2021 2:27 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
tomsense76
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Re: Help replicating TSM in 401k

Post by tomsense76 »

80/20 should more or less cover it. This does vary over time. A few months back it was closer to 85/15 IIRC.

Idk if you are a mathy kind of person and curious, one can calculate this more precisely with data from Morningstar and an optimizer like one might find in Python or MATLAB. If you are not a mathy person, just ignore that and go with 80/20.

Interestingly having the market cap weight of small hasn't seemed to matter that much. So just holding an S&P 500 fund would do reasonably well if that appeals to you.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
Topic Author
Bluemnatra
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Re: Help replicating TSM in 401k

Post by Bluemnatra »

TropikThunder wrote: Wed Sep 22, 2021 2:15 pm
Bluemnatra wrote: Wed Sep 22, 2021 12:38 pm I'm having trouble deciding how to best replicate the US TSM in my 401k as I only have access to a 500 index fund and not a total US market index fund.

I have access to;

DFA U.S. Targeted Value Fund (DFFVX) (0.33% ER)
TIAA-CREF Small-Cap Blend Index Fund (TISBX) (0.06% ER)
Vanguard Explorer Fund (VEXRX) (0.30% ER)

And what percentage of allocation would you recommend? 80/20?

Thank you
Others have given good responses, I just wanted to add something. This is a pet peeve of mine and one of the issues with having poorly informed plan committees and/or advisors. Or maybe they’re not poorly informed, they’re doing it on purpose? Who knows!

But the issue is providing fund selections that mix index providers. An S&P500 fund is (obviously) run by S&P, and it contains (obviously) the biggest 500 companies (not exactly but you know what I mean). So a plan should then offer a small cap from the same index provider, right? S&P makes mid cap and small cap indexes. Several mutual fund companies provide completion indexes that are mid and small combined (VEXMX for example).

But instead, OP’s plan includes a small cap that follows a completely different index: TISBX follows the Russell 2000 index, which is a partner for the Russell 1000 Large Cap. If you want to split out Large Cap vs the rest, you can use a Russell 1000 large cap fund (which TIAA also provides) plus TISBX. But if you’re starting with an S&P500 fund and you use TISBX as you completion index, you’re omitting #’s 500-1,000. Is that a huge deal? No, but it’s totally avoidable.
It's with John Hancock and so I've come to accept it's better than nothing. I'm trying to lobby for better funds. Here's our recent financial statement:

Image
"The greatest enemy of a good plan is the dream of a perfect plan"
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