2 fund or 3 fund vs S&P 500

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passive101
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Joined: Tue May 05, 2020 2:47 pm

2 fund or 3 fund vs S&P 500

Post by passive101 »

My 401k offers these 3 funds. I'd like to get as close as possible to something like VTI.

VFIAX - Vanguard 500 Index Fund ER .04
VSIAX - Vanguard Small-Cap Value Index ER .07
VIMAX - Vanguard Mid-Cap Index ER .05

The approximation site from Bogleheads shows the use of VFIAX, but not the small cap or mid cap that my plan offers. When I compare the performance of the Mid cap and small cap listed here https://www.bogleheads.org/wiki/Approxi ... hree_funds it looks like mid and small cap I have perform worse then the ones they list. Example VSMAX Vanguard US small cap outperforms the VSIAX my plan offers.

Should I try to do the 2 or 3 fund or just put 100% in the S&P 500? I just want the more diversification if they performance would be the same and perform like a total market fund like VTI.

Am I looking at things wrong?
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Taylor Larimore
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Re: 2 fund or 3 fund vs S&P 500

Post by Taylor Larimore »

passive101:

The 500 Index fund owns the largest and most successful companies in the United States. In my opinion, your 500 index fund is the only U.S. stock fund that you need. It is also the lowest cost of the funds you listed.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Deep Down, I remain absolutely confident that the vast majoity orf American families would be well served by owning their equity holding in a Standard & Poor's 500 Index fund and holding their bonds in a total bond market index fund."
Last edited by Taylor Larimore on Sun Jan 16, 2022 7:55 pm, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle
Marseille07
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Re: 2 fund or 3 fund vs S&P 500

Post by Marseille07 »

I agree with Taylor, I'd go 100% S&P500 and call it a day instead of doing your own thing.
quietseas
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Re: 2 fund or 3 fund vs S&P 500

Post by quietseas »

I would look at this chart:
https://www.portfoliovisualizer.com/bac ... ion2_2=100

And then I think you will decide, as I have, that an S&P 500 Index fund and Total Stock Market have performed almost identically for the past 30 years, and therefore you'd only need to buy the S&P 500 fund if you prefer simplicity.
cegibbs
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Re: 2 fund or 3 fund vs S&P 500

Post by cegibbs »

Taylor Larimore wrote: Sun Jan 16, 2022 7:54 pm passive101:

The 500 Index fund owns the largest and most successful companies in the United States. In my opinion, your 500 index fund is the only U.S. stock fund that you need. It is also the lowest cost of the funds you listed.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Deep Down, I remain absolutely confident that the vast majoity orf American families would be well served by owning their equity holding in a Standard & Poor's 500 Index fund and holding their bonds in a total bond market index fund."

+1, and Warren Buffett approved too.
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abuss368
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Re: 2 fund or 3 fund vs S&P 500

Post by abuss368 »

cegibbs wrote: Mon Jan 17, 2022 9:06 am
Taylor Larimore wrote: Sun Jan 16, 2022 7:54 pm passive101:

The 500 Index fund owns the largest and most successful companies in the United States. In my opinion, your 500 index fund is the only U.S. stock fund that you need. It is also the lowest cost of the funds you listed.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Deep Down, I remain absolutely confident that the vast majoity orf American families would be well served by owning their equity holding in a Standard & Poor's 500 Index fund and holding their bonds in a total bond market index fund."

+1, and Warren Buffett approved too.
That is correct. You can read more about the Jack Bogle and Warren Buffett Two Fund Portfolio here:

viewtopic.php?f=10&t=188176

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
3funder
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Re: 2 fund or 3 fund vs S&P 500

Post by 3funder »

You could try and approximate the total market or use the S&P 500. It is simpler to go with the latter.
Global stocks, US bonds, and time.
exodusNH
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Re: 2 fund or 3 fund vs S&P 500

Post by exodusNH »

passive101 wrote: Sun Jan 16, 2022 7:47 pm My 401k offers these 3 funds. I'd like to get as close as possible to something like VTI.

VFIAX - Vanguard 500 Index Fund ER .04
VSIAX - Vanguard Small-Cap Value Index ER .07
VIMAX - Vanguard Mid-Cap Index ER .05

The approximation site from Bogleheads shows the use of VFIAX, but not the small cap or mid cap that my plan offers. When I compare the performance of the Mid cap and small cap listed here https://www.bogleheads.org/wiki/Approxi ... hree_funds it looks like mid and small cap I have perform worse then the ones they list. Example VSMAX Vanguard US small cap outperforms the VSIAX my plan offers.

Should I try to do the 2 or 3 fund or just put 100% in the S&P 500? I just want the more diversification if they performance would be the same and perform like a total market fund like VTI.

Am I looking at things wrong?
"Value" stocks haven't been performing well for quite some time.

You could get a nearly indistinguishable from VTI by owning just the 500 fund. If you want to come closer to VTI, you could do 10% or 15% of the midcap fund. That would just leave you missing the small cap; that's only about 5% of the market and probably won't be noticeable.
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