Approximating total US market with these investment options

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Topic Author
Morik
Posts: 1345
Joined: Tue Nov 25, 2014 11:26 am

Approximating total US market with these investment options

Post by Morik »

Hi Bogleheads,

I would like advice on how to approximate the US stock market with the investments available to me.
I am using the instant xray method from: https://www.bogleheads.org/wiki/Approxi ... ock_market

In discussion below when I write style boxes, I'll do them like this:
A B C
D E F
G H I

Matching the boxes on Morningstar (top row large cap, then mid cap middle, small cap bottom. Value is the left column, blend is the middle, growth is the right).

Various accounts:
A (401k/HSA): Has S&P 500 and extended market available

B: Roth IRAs at Vanguard, so any vanguard ETF

C: TIAA cref with the following funds having reasonable ERs:
VIMAX (vanguard mid-cap index), ER is 0.05%
TISBX (Cref small-cap blend index), ER is 0.06%
DFA US Core Equity 2 Portfolio Institutional (DFQTX) net ER is 0.19%
DFA US Large Cap Value Portfolio Institutional (DFLVX), ER is 0.22%
TIAA-CREF Social Choice Equity Fund (TISCX), ER is 0.18%


Account size as %s of total I want invested in US total market (I have fixed income/low risk, as well as international covered in these accounts already):

A: 23%
B: 53%
C: 24% (this is going to increase; there are no international equities I use from this account, and the fixed income via TIAA Traditional I decided to get out of due to the illiquidity (replacing with US bond market in the 401k), so all money in account C will eventually be just for US equity).

So account C is my main issue; the available large cap stocks are either DFQTX which is a whole-market fund but value & small cap tilted, or DFLVX which is also value tilted, or TISCX which is a type of fund I tend to stay away from...
All of the money in account C needs to go to US equities (because the international & bond funds all have poor expense ratios). But, there isn't a solid large-cap option in this account like there is for mid-cap & small-cap. So the issue is what to do about that.


VTI (my reference point for approximating total market) has:
15 20 36
5 8 5
2 3 1

I couldn't get mixtures with DFLVX to work very well (always too much value tilt in the large caps), nor using just TISCX by itself in account C.

So, the viable things in order of ascending difficulty:
1. Just use DFQTX in account C. DFQTX is small & value tilted; by mixing with the other accounts which are all S&P500 it actually gets pretty close to approximating total market. So doing 76% VOO + 24% DFQTX gives me:
18 23 36
6 9 3
2 2 1

Modeling what happens when the amount of money in account C proportionally increases (66% VOO, 34% DFQTX):
17 22 35
7 9 4
3 3 1

Both are fairly close to VTI.

2. Tilt towards mid/small cap; keep other accounts in VOO, and just put this account towards VIMAX & TISBX.
E.g., 76% VOO, 12% VIMAX, 12% TISBX:
15 19 33
7 10 5
4 5 3

After C finishes growing proportionally:
66% VOO, 17% VIMAX, 17% TISBX:
13 17 29
8 11 6
5 6 4


3. Mix TISBX and VIMAX with DFQTX. This requires effort when I rebalance, to check what these ratios should be.
E.g., 76% VOO, 14% DFQTX, 5% VIMAX, 5% TISBX
16 21 35
7 9 4
3 3 2

After C grows proportionally it is actually closer to just use 100% DFQTX in account C than to add any VIMAX/TISBX.


4. Add TISBX to TISCX in account C. This requires effort when I rebalance, to check what these ratios should be.
76% VOO, 19% TISBX, 5% TISBX:
17 24 37
6 7 4
2 2 2

And after C grows proportionally
66% VOO, 28% TISCX, 6% TISBX:
16 24 35
6 7 4
3 3 2





It seems like just using DFQTX gets me pretty close. Its more expensive than TISBX or VIMAX, but overall 0.19 isn't too bad.
Looking over all this it seems fairly clear that DFQTX is a good route--easy to implement/maintain, fairly close approximation.
Anyone have any other ideas/thoughts?
exodusNH
Posts: 10350
Joined: Wed Jan 06, 2021 7:21 pm

Re: Approximating total US market with these investment options

Post by exodusNH »

Morik wrote: Mon Oct 25, 2021 1:46 pm C: TIAA cref with the following funds having reasonable ERs:
VIMAX (vanguard mid-cap index), ER is 0.05%
TISBX (Cref small-cap blend index), ER is 0.06%
DFA US Core Equity 2 Portfolio Institutional (DFQTX) net ER is 0.19%
DFA US Large Cap Value Portfolio Institutional (DFLVX), ER is 0.22%
TIAA-CREF Social Choice Equity Fund (TISCX), ER is 0.18%
I think it would be helpful to list all of your fund choices in this account.
Topic Author
Morik
Posts: 1345
Joined: Tue Nov 25, 2014 11:26 am

Re: Approximating total US market with these investment options

Post by Morik »

exodusNH wrote: Mon Oct 25, 2021 2:14 pm
Morik wrote: Mon Oct 25, 2021 1:46 pm C: TIAA cref with the following funds having reasonable ERs:
VIMAX (vanguard mid-cap index), ER is 0.05%
TISBX (Cref small-cap blend index), ER is 0.06%
DFA US Core Equity 2 Portfolio Institutional (DFQTX) net ER is 0.19%
DFA US Large Cap Value Portfolio Institutional (DFLVX), ER is 0.22%
TIAA-CREF Social Choice Equity Fund (TISCX), ER is 0.18%
I think it would be helpful to list all of your fund choices in this account.
Sure, in order of ascending net expense ratio (net ER is listed at the end of each entry that has one). This is an 'RC' (retirement choice) contract.

TRAD (1% guaranteed, this is the illiquid version of TRAD that only allows withdrawal via complete liquidation of the position over 84 months)

Vanguard Mid-Cap Index Fund Admiral (VIMAX) 0.05
TIAA-CREF Small-Cap Blend Index Fund (Institutional) (TISBX) 0.06
Vanguard Real Estate Index Fund Admiral (VGSLX) 0.12
TIAA-CREF Social Choice Equity Fund (Institutional) (TISCX) 0.18
DFA US Core Equity 2 Portfolio Institutional (DFQTX) 0.19
Vanguard Short-Term Treasury Fund Investor (VFISX) 0.2
DFA US Large Cap Value Portfolio Institutional (DFLVX) 0.22
DFA International Core Equity Portfolio Institutional (DFIEX) 0.25
TIAA-CREF Inflation-Linked Bond Fund (Institutional) (TIILX) 0.25
American Funds Growth Fund of America - R6 (RGAGX) 0.3
DFA US Small Cap Portfolio Institutional Class Shares (DFSTX) 0.33
TIAA-CREF High-Yield Fund (Institutional) (TIHYX) 0.36
TIAA-CREF Lifecycle Retirement Income Fund (Institutional) (TLRIX) 0.37
PGIM Short-Term Corporate Bond R6 (PSTQX) 0.38
TIAA-CREF Lifecycle 2015 Fund (Institutional) (TCNIX) 0.38
DFA Emerging Markets Core Equity Portfolio Institutional (DFCEX) 0.39
TIAA-CREF Lifecycle 2020 Fund (Institutional) (TCWIX) 0.39
<skipping the other Lifecycle funds, they have 5 year increments up to lifecycle 2060, ER is 0.39-0.45>
DFA International Small Company I (DFISX) 0.44
Calvert U.S. Large Cap Core Responsible Index A (CSXAX) 0.49
DoubleLine Total Return Bond Fund Class I (DBLTX) 0.5
MFS Growth Fund Class R6 (MFEKX) 0.53
Loomis Sayles Bond Fund Institutional Class Shares (LSBDX) 0.67
PGIM Jennison Natural Resources Z (PNRZX) 0.94
BlackRock Global Allocation Fund Investor A Class Shares (MDLOX) 1.08


In case its relevant, my overall allocation is: 80% stock, 20% bonds
Stock comprises 55% total US market, 45% total international market
Bonds are split between TRAD (as mentioned I'm doing the slow transfer payout annuity) and BND (US total bond market).

Basic accounts breakdown:
Group 'A' includes a 401k & HSA, and has access to super-low-cost institutional variants of vanguard funds (VDIPX/VEMRX/no ticker Vanguard institutional bond market at ER 0.025/no ticker Vanguard institutional S&P500 index at ER 0.012)

All my international equities are held in VDIPX/VEMRX in an 80/20 ratio (matching total international market) due to the low expense ratios there.
All my bonds (outside of TRAD) are also held here.

Group 'B' are Roth IRAs at vanguard.

Group 'C' is the TIAA Cref 403b with the investment options listed above. (This is the main contract that new investments are going into; some older contracts were in TRAD and are transferring out, other older contracts I rolled into this RC contract.)

I tax-adjust the values before computing my allocations. So Roth 401k/Roth IRAs are 100% of nominal value, and I apply my guessed average-tax-rate-at-withdrawal-time to the nominal value of pre-tax accounts. I use only these post-tax values when determining my current asset allocation/drift/etc.

%s of all (post-tax) assets by group:
A: 60%
B: 23%
C: 17%
exodusNH
Posts: 10350
Joined: Wed Jan 06, 2021 7:21 pm

Re: Approximating total US market with these investment options

Post by exodusNH »

Morik wrote: Mon Oct 25, 2021 2:39 pm
exodusNH wrote: Mon Oct 25, 2021 2:14 pm TRAD (1% guaranteed, this is the illiquid version of TRAD that only allows withdrawal via complete liquidation of the position over 84 months)

Vanguard Mid-Cap Index Fund Admiral (VIMAX) 0.05
TIAA-CREF Small-Cap Blend Index Fund (Institutional) (TISBX) 0.06
Vanguard Real Estate Index Fund Admiral (VGSLX) 0.12
TIAA-CREF Social Choice Equity Fund (Institutional) (TISCX) 0.18
DFA US Core Equity 2 Portfolio Institutional (DFQTX) 0.19
Vanguard Short-Term Treasury Fund Investor (VFISX) 0.2
DFA US Large Cap Value Portfolio Institutional (DFLVX) 0.22
DFA International Core Equity Portfolio Institutional (DFIEX) 0.25
TIAA-CREF Inflation-Linked Bond Fund (Institutional) (TIILX) 0.25
American Funds Growth Fund of America - R6 (RGAGX) 0.3
DFA US Small Cap Portfolio Institutional Class Shares (DFSTX) 0.33
TIAA-CREF High-Yield Fund (Institutional) (TIHYX) 0.36
TIAA-CREF Lifecycle Retirement Income Fund (Institutional) (TLRIX) 0.37
PGIM Short-Term Corporate Bond R6 (PSTQX) 0.38
TIAA-CREF Lifecycle 2015 Fund (Institutional) (TCNIX) 0.38
DFA Emerging Markets Core Equity Portfolio Institutional (DFCEX) 0.39
TIAA-CREF Lifecycle 2020 Fund (Institutional) (TCWIX) 0.39
<skipping the other Lifecycle funds, they have 5 year increments up to lifecycle 2060, ER is 0.39-0.45>
DFA International Small Company I (DFISX) 0.44
Calvert U.S. Large Cap Core Responsible Index A (CSXAX) 0.49
DoubleLine Total Return Bond Fund Class I (DBLTX) 0.5
MFS Growth Fund Class R6 (MFEKX) 0.53
Loomis Sayles Bond Fund Institutional Class Shares (LSBDX) 0.67
PGIM Jennison Natural Resources Z (PNRZX) 0.94
BlackRock Global Allocation Fund Investor A Class Shares (MDLOX) 1.08
These are some very interesting choices.

DFA US Core Equity 2 Portfolio Institutional (DFQTX) says it's benchmark is the Russel 3000. You could just hold this for your US stocks.

Another option would be to look at all of your accounts as one gigantic portfolio. If you wanted to hold just

Vanguard Mid-Cap Index Fund Admiral (VIMAX) 0.05
TIAA-CREF Small-Cap Blend Index Fund (Institutional) (TISBX) 0.06

here, you could then hold a S&P 500 fund in another account to get the full US market if you, very roughly, did something like ~80% S&P 500, 15% VIMAX and 5% TISBX. (Those definitely aren't exact percentages.) In your other accounts, you could then reduce your "extended market" holdings.
Topic Author
Morik
Posts: 1345
Joined: Tue Nov 25, 2014 11:26 am

Re: Approximating total US market with these investment options

Post by Morik »

exodusNH wrote: Mon Oct 25, 2021 2:56 pm These are some very interesting choices.

DFA US Core Equity 2 Portfolio Institutional (DFQTX) says it's benchmark is the Russel 3000. You could just hold this for your US stocks.

Another option would be to look at all of your accounts as one gigantic portfolio. If you wanted to hold just

Vanguard Mid-Cap Index Fund Admiral (VIMAX) 0.05
TIAA-CREF Small-Cap Blend Index Fund (Institutional) (TISBX) 0.06

here, you could then hold a S&P 500 fund in another account to get the full US market if you, very roughly, did something like ~80% S&P 500, 15% VIMAX and 5% TISBX. (Those definitely aren't exact percentages.) In your other accounts, you could then reduce your "extended market" holdings.
I do already treat my accounts as one giant portfolio. I am not currently holding any extended market fund--my holdings look something like this:
Group A: Bond market, International market (developed + emerging, the 401k doesn't have a combined fund), S&P 500 index
Group B: US total market index
Group C: Small cap blend index

The reason I posted is because I realized the small cap blend in group C is very much tilting my US equity holdings towards small cap. I already swapped the Roth IRAs (group B) to hold S&P500 instead of total market to alleviate somewhat while I figure out what I want to do. I also traded some of the small cap blend index into mid cap index in the 403b.

The main issue is that if I hold S&P500 elsewhere and just hold VIMAX/TISBX in the 403b, I am overweighting mid/small cap. See option #2 from my original post, which discusses this (pasted below):
Morik wrote: 2. Tilt towards mid/small cap; keep other accounts in VOO, and just put this account towards VIMAX & TISBX.
E.g., 76% VOO, 12% VIMAX, 12% TISBX:
15 19 33
7 10 5
4 5 3

After C finishes growing proportionally:
66% VOO, 17% VIMAX, 17% TISBX:
13 17 29
8 11 6
5 6 4
I.e., out of the money I have left to allocate after allocating bonds & international (i.e., the money I want to invest in US market), 76% of it is in other accounts, and 24% of it is in the 403b.

So, e.g., 76% VOO, 18% VIMAX, and 6% TISBX results in style box:
15 20 33
8 12 6
2 2 2

And then as the amount of available cash in account C grows from those TRAD transfer payout annuities, this skews even harder towards midcap overweighting. Though perhaps I don't need to worry about that right now and can revisit as the TRAD payouts continue.

So anyway, I guess I can make it work by overweighting midcaps, or by just holding DFQTX in this account and VOO elsewhere (if I hold total stock market elsewhere, the small cap tilt of DFQTX tilts me towards small cap quite a bit, while holding VOO elsewhere results in a bit more balance, closer to total stock market).
exodusNH
Posts: 10350
Joined: Wed Jan 06, 2021 7:21 pm

Re: Approximating total US market with these investment options

Post by exodusNH »

Morik wrote: Mon Oct 25, 2021 3:09 pm So anyway, I guess I can make it work by overweighting midcaps, or by just holding DFQTX in this account and VOO elsewhere (if I hold total stock market elsewhere, the small cap tilt of DFQTX tilts me towards small cap quite a bit, while holding VOO elsewhere results in a bit more balance, closer to total stock market).
When in doubt, simpler is usually better. Given that your Roth is 2x the size of this new account, you could always compensate on a small and value tilt of DFQTX with Vanguard's large cap growth fund.

Fiddling around the edges won't change things too much. How much you save is more important than exactly what you invest in, assuming you're not being ridiculous. (Which you're not!)
Topic Author
Morik
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Joined: Tue Nov 25, 2014 11:26 am

Re: Approximating total US market with these investment options

Post by Morik »

exodusNH wrote: Mon Oct 25, 2021 3:37 pm When in doubt, simpler is usually better. Given that your Roth is 2x the size of this new account, you could always compensate on a small and value tilt of DFQTX with Vanguard's large cap growth fund.

Fiddling around the edges won't change things too much. How much you save is more important than exactly what you invest in, assuming you're not being ridiculous. (Which you're not!)
I agree with simpler is better--I have tried various more complicated things over the years and eventually just decided that it wasn't worth the effort. My goal for the rest of my investing lifetime is to stick as closely as I can to a simple 3 fund portfolio with the equity portion approximating the total world stock market.

So offsetting DFQTX in another account would be more complication than I think its worth.

Just for me to look at all together here, total stock market style box again:
15 20 36
5 8 5
2 3 1

For my situation, there are two solutions here that would be simple to implement.
1. Accept DFQTX as 'close enough' to total stock market when blended with S&P500. If I go this route, I'd just dump the balance of the 403b into DFQTX, keep all other US equities in S&P500, and re-evaluate in a few years as the ratios change. Account C is only invested in US equity, and is growing still with contributions, so eventually it may be 'too much' DFQTX. I could just not worry about it and accept the unintentional small/value tilt here.

Style box if I swap to this (76% VOO, 24% DFQTX):
18 23 36
6 9 3
2 2 1

2. Mix mid-cap & small-cap indices in the 403b (VIMAX & TISBX), and keep S&P 500 everywhere else. This isn't really much more work for me than just using DFQTX due to the way I have my spreadsheets/etc set up.
But again, due to the ratio of the size of account C to the sizes of the other account's funds towards US equities, this is going to tilt towards mid or small cap. A stronger small/mid tilt than I'd get with DFQTX (since DFQTX has a lot of large cap in it), but no value tilt here.
Cheaper on the expense ratio front, which I always like.

Style box for this (76% VOO, 16% VIMAX, 8% TISBX):
15 20 33
8 12 6
3 3 2


I'm kind of torn. The DFQTX works pretty well, but VIMAX/TISBX are cheaper...
tashnewbie
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Joined: Thu Apr 23, 2020 12:44 pm

Re: Approximating total US market with these investment options

Post by tashnewbie »

Morik wrote: Mon Oct 25, 2021 4:01 pm I'm kind of torn. The DFQTX works pretty well, but VIMAX/TISBX are cheaper...
Assuming weighted ER of VIMAX/TISBX is 0.055%, then you're paying an extra $135 per $100,000 for DFQTX.
Topic Author
Morik
Posts: 1345
Joined: Tue Nov 25, 2014 11:26 am

Re: Approximating total US market with these investment options

Post by Morik »

tashnewbie wrote: Mon Oct 25, 2021 4:13 pm
Morik wrote: Mon Oct 25, 2021 4:01 pm I'm kind of torn. The DFQTX works pretty well, but VIMAX/TISBX are cheaper...
Assuming weighted ER of VIMAX/TISBX is 0.055%, then you're paying an extra $135 per $100,000 for DFQTX.
Yeah, I think I'm gonna go with the VIMAX/TISBX. That cost adds up over time. Contributions alone are adding $100k every 4 years to the account, and there is already a good bit in there.
While a few hundred dollars a year aren't the end of the world, I would rather save them if I can.

Being a little overweight in mid/small cap isn't the end of the world.
If the skew gets very high I will consider other options--other funds may be offered in the future too, who knows.
placeholder
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Joined: Tue Aug 06, 2013 12:43 pm

Re: Approximating total US market with these investment options

Post by placeholder »

Just a note about style boxes but they look better if you put a leading zero on single digit allocations like:

16 24 35
06 07 04
03 03 02
Topic Author
Morik
Posts: 1345
Joined: Tue Nov 25, 2014 11:26 am

Re: Approximating total US market with these investment options

Post by Morik »

placeholder wrote: Mon Oct 25, 2021 4:50 pm Just a note about style boxes but they look better if you put a leading zero on single digit allocations like:

16 24 35
06 07 04
03 03 02
Aha thanks, I had tried adding spaces but they disappeared when I posted.
placeholder
Posts: 8421
Joined: Tue Aug 06, 2013 12:43 pm

Re: Approximating total US market with these investment options

Post by placeholder »

Morik wrote: Mon Oct 25, 2021 4:50 pm
placeholder wrote: Mon Oct 25, 2021 4:50 pm Just a note about style boxes but they look better if you put a leading zero on single digit allocations like:

16 24 35
06 07 04
03 03 02
Aha thanks, I had tried adding spaces but they disappeared when I posted.
You can do the spaces or tabs or other formatting with the code tag but it's kind of overkill for style boxes:

Code: Select all

16 24 35
 6  7  4
 3  3  2
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