500 Index preferred over Total Market

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Triple digit golfer
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500 Index preferred over Total Market

Post by Triple digit golfer »

Another thread got me thinking. Are there any Bogleheads who prefer the 500 index over the Total Market. That is, you have access to both, but actually use the 500 index instead of Total Stock. If so, why?

I know of two prominent posters who will likely chime in if they see the thread.

I am thinking about this because I have the 500 index in some accounts (currently contributing to this account) and total market (not currently contributing) in others. When I add to one account with only the 500 index, in order to stay in balance with my overall stock/bond AA, I find myself selling Total Stock in the other account to buy Total Bond.

It gives me very slight hesitation to be regularly exchanging from Total Stock to 500 index. I am considering eliminating Total Stock and exchanging it all for 500 index and holding only the 500 index for my U.S. equity moving forward. Not sure that really makes much sense either, other than I'd be ripping off the band-aid in one fell swoop, so to speak, and then moving forward would be exchanging from apples to apples instead of red apples to green apples.
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Re: 500 Index preferred over Total Market

Post by scornovaca »

Generally always use Total Stock due to the inclusion (albeit small) of small caps (pun intended). For my children's UTMA accounts I use the 500 index for two reasons: 1) No capital gains distributions for quite awhile (although Total Stock does this now as well) 2) all the dividends are fully qualified which means I can take income up to 2 * $1100 of qualified dividends and long term capital gains harvested each year (meaning I sell the shares of the fund) and not have to pay any kiddie tax on them.
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Mountain Doc
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Re: 500 Index preferred over Total Market

Post by Mountain Doc »

Given both options I would choose Total Stock Market, but practically speaking I consider them interchangeable. I wouldn't hesitate at all to use a 500 fund if that's all I had access to, and I personally wouldn't even bother adding Extended Market to complete my US exposure. The difference between the two just isn't going to move the needle either direction in my financial life. Don't sweat the small stuff.
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arcticpineapplecorp.
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Re: 500 Index preferred over Total Market

Post by arcticpineapplecorp. »

not sure why you'd prefer 500 over TSM.

TSM is more diversified (has mid and small) whereas 500 does not.

Over a long enough period of time, they may perform similarly, but in the short term one may do better than the other. YTD TSM has done better then 500: (can't upload images for some reason):

S&P500 YTD 15.50%
TSM YTD 17.98%

There was a post recently ("Not Sure Tax Loss Harvesting Was Worth It" source: viewtopic.php?f=1&t=329966) about someone who did tax loss harvesting between the two and even though they both went up because 500 went up less (s/he switched from TSM to 500) his return was lower than it would have been.

There were also posts about the fact that Tesla was NOT part of S&P500 but WAS part of TSM and how/if that affected returns (until Tesla was added to the S&P500 index).
Last edited by arcticpineapplecorp. on Fri Dec 11, 2020 12:12 pm, edited 1 time in total.
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stan1
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Re: 500 Index preferred over Total Market

Post by stan1 »

I view them as very similar (but not substantially identical). I do not feel the need to add a S&P 500 Completion Index to an S&P 500 position in order to more fully replicate Total Stock Market. So I don't have a preference for one over the other. Minor differences over things like TSLA or 97% QDI vs 100% QDI will not make the difference in long term investing success over a lifetime. Tax laws will change. Companies will come and go.
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Triple digit golfer
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Re: 500 Index preferred over Total Market

Post by Triple digit golfer »

I am contributing to the 500 index but not TSM due to availability in my accounts. Additionally, in order to keep my stock/bond AA in balance, I end up exchanging TSM in my IRA for bonds each pay period (in reality I do it about once a month), further increasing the weighing to the 500 index.

Is this any concern or who cares?
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Traveller
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Re: 500 Index preferred over Total Market

Post by Traveller »

I prefer Total Stock Market, but right now have more in the S&P 500 fund due to some excellent tax loss harvesting opportunities which presented themselves earlier this year. New contributions continue to go to Total Market.
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Re: 500 Index preferred over Total Market

Post by vineviz »

Triple digit golfer wrote: Fri Dec 11, 2020 11:45 am It gives me very slight hesitation to be regularly exchanging from Total Stock to 500 index. I am considering eliminating Total Stock and exchanging it all for 500 index and holding only the 500 index for my U.S. equity moving forward.
It's hard for me to provide much advice since I can't figure out WHY precisely this particular rebalancing is causing concern.

In general I can't think of any rational reason to prefer the S&P 500 over total stock market. You'd be ignoring 20% of the investable US stock market, effectively making a bet against small cap US stocks. The offset is that the stocks you would own would have higher average profitability, but if a factor tilt is what you're after I can imagine better ways to do that.

If the account you contribute to doesn't have a TSM fund I don't think I'd worry too much about it one way or the other, but I can't see why doubling down in the other accounts is called for. If anything I'd probably make the case to include something like Vanguard extended market in those other accounts to offset the concentration in the S&P 500 that you're accumulating.
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Re: 500 Index preferred over Total Market

Post by TheTimeLord »

I tend to use the S&P 500 for a couple sort of non-BH reasons but it is also easier to plug into my model. That said, currently I would likely distribute new money across QQQ, RSP and IJR (maybe IWM) rather than a S&P 500 index ETF (VOO, IVV or SPY) unless I was buying it with something less than BH motives like my SPY purchase yesterday. I have never been too excited about total market because of the enormous overlap with the S&P 500.
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Re: 500 Index preferred over Total Market

Post by michaeljc70 »

I generally use the TSM but have used the S&P 500 in two case:

1) No TSM fund available. Possible with some HSAs and 401ks.
2) I didn't want a wash sale from TSM and wanted to buy back immediately.
Last edited by michaeljc70 on Fri Dec 11, 2020 12:18 pm, edited 1 time in total.
columbia
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Re: 500 Index preferred over Total Market

Post by columbia »

It's a matter of preference and your choice will never have a material impact on your financial life.
JD2775
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Re: 500 Index preferred over Total Market

Post by JD2775 »

I use both (VFIAX in Roth, VTSAX in taxable)....the only reason being the wash sale rule. I used to just have VTSAX in both accounts, until some smart Bogleheads steered me in the right direction
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Triple digit golfer
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Re: 500 Index preferred over Total Market

Post by Triple digit golfer »

vineviz wrote: Fri Dec 11, 2020 12:08 pm
Triple digit golfer wrote: Fri Dec 11, 2020 11:45 am It gives me very slight hesitation to be regularly exchanging from Total Stock to 500 index. I am considering eliminating Total Stock and exchanging it all for 500 index and holding only the 500 index for my U.S. equity moving forward.
It's hard for me to provide much advice since I can't figure out WHY precisely this particular rebalancing is causing concern.
I guess because it's not quite apples to apples. If the Total Market is underperforming, then I exchange into the outperforming 500 index, I'm essentially buying high and selling low.

Probably not worth worrying about, I suppose.

I can add a small cap fund in the account that I'm not currently contributing to, but over time it will become less and less as a percentage of my portfolio as I keep adding to the 500 index in the accounts in which I am contributing. That's why I'm wondering if it's even worth it, or just consider the 500 index and Total Market one and the same, keep it simple, and exchange from one to the other as needed and not fret over it.
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Re: 500 Index preferred over Total Market

Post by KineticSync »

I use both (VFIAX in Roth, VTSAX in taxable)....the only reason being the wash sale rule. I used to just have VTSAX in both accounts, until some smart Bogleheads steered me in the right direction
Same here for the same reason except FXAIX in deferred, VTSAX in taxable. Peace of mind about auto reinvests and wash sales. Thanks Bogleheads!
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Re: 500 Index preferred over Total Market

Post by iudiehard1 »

I use both, but consider them the same. I actually buy the lower cost of the 2 depending on which is available in company 401k and College 529. But when given the choice, I actually take the S&P (VOO) in my taxable over Total Market. We can debate it all we want...but it works for Warren Buffett........so who am I to argue with the Oracle.
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RAchip
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Re: 500 Index preferred over Total Market

Post by RAchip »

Total market guarantees that you will own every single one of the worst public companies in the world.

For index investing, I prefer the 500 biggest and best US companies.
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SmileyFace
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Re: 500 Index preferred over Total Market

Post by SmileyFace »

Taking an alternative view the prior poster:

The S&P500 has you holding 500 of the companies which have become the most successful (and usually when they "enter" this index - the price of the stock already has this success built in).

For index investing, I prefer to hold a sampling of ALL the companies - the ones that have already become very successful and entered the S&P500 but also the ones that will have crazy run-ups in their prices (think Tesla - its price went crazy BEFORE they were put on the 500) as they become successful (even if this means including some duds).

In reality - over the decades - they track so closely it doesn't much matter.
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Re: 500 Index preferred over Total Market

Post by TheTimeLord »

RAchip wrote: Fri Dec 11, 2020 12:47 pm Total market guarantees that you will own every single one of the worst public companies in the world.

For index investing, I prefer the 500 biggest and best US companies.
Awesome the S&P 500 guaranteed you owned GE.
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Re: 500 Index preferred over Total Market

Post by nisiprius »

Given that the expense ratios have been the same for at least a decade, I see no reason to prefer 500 Index. The S&P 500 was always intended to represent "the market," but since in 1957 they couldn't do updated calculations on the whole market as frequently as they wanted to, they decided to just use 500. Since people hadn't heard of the (alleged?) "small firm effect" and weren't obsessing over market cap, they decided to pick the stocks of 500 "leading companies in leading industries" instead of picking the 500 largest by market cap.

The S&P 500 is an adequate approximation to the total market, but broad and total market indexes and funds are a good approximation.

The S&P 500 persists because of tradition, marketing, the lack of any truly dominant total market index... and because of continuity. The Blue Hills Weather Observatory measures barometric pressure in inches of mercury... literal inches of literal mercury in evacuated glass tubes... because it is more valuable to have a continuous record all measured in exactly the same way, then to have a record constantly interrupted by changes and improvements.

The fact that the S&P 500 involves human judgement has lead some to castigate it as "actively managed." Conversely (or perversely) others like it because they feel that it is actively managed. But I think that's weird. If you think that the S&P 500 committee is trying to beat the total market by selecting superior stocks, it is only by a microscopic amount; if you believe in active management, surely there are better actively managed funds than an S&P 500 index fund.

We will soon have an interesting test of how much it matters on December 21st, when Tesla is going to be added to the S&P 500 list. My personal prediction is that this is going to be a nonevent, and that it is not going to open up any large amount of white space between the VTI and VOO growth charts. Others expect it to be apocalyptic. At least we will know pretty soon.

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Last edited by nisiprius on Fri Dec 11, 2020 1:18 pm, edited 1 time in total.
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engel001
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Re: 500 Index preferred over Total Market

Post by engel001 »

Although not every year, Qualified Dividends generally favors 500 Index over Total Stock. Last year: 100% vs. 94%. In 2014 they were both 100%.
Last edited by engel001 on Fri Dec 11, 2020 1:20 pm, edited 1 time in total.
stan1
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Re: 500 Index preferred over Total Market

Post by stan1 »

Triple digit golfer wrote: Fri Dec 11, 2020 12:23 pm Probably not worth worrying about, I suppose.
Bolded for emphasis.
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Taylor Larimore
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500 Index or Total Market Index?

Post by Taylor Larimore »

Triple digit golfer wrote: Fri Dec 11, 2020 11:45 am Another thread got me thinking. Are there any Bogleheads who prefer the 500 index over the Total Market. That is, you have access to both, but actually use the 500 index instead of Total Stock. If so, why?

I know of two prominent posters who will likely chime in if they see the thread.

I am thinking about this because I have the 500 index in some accounts (currently contributing to this account) and total market (not currently contributing) in others. When I add to one account with only the 500 index, in order to stay in balance with my overall stock/bond AA, I find myself selling Total Stock in the other account to buy Total Bond.

It gives me very slight hesitation to be regularly exchanging from Total Stock to 500 index. I am considering eliminating Total Stock and exchanging it all for 500 index and holding only the 500 index for my U.S. equity moving forward. Not sure that really makes much sense either, other than I'd be ripping off the band-aid in one fell swoop, so to speak, and then moving forward would be exchanging from apples to apples instead of red apples to green apples.
Triple digit golfer:
Like Mr. Bogle, I slightly prefer a Total Stock Market Index Fund. We held Vanguard TSM for many years. At one point, I think it was during the 2000-2003 bear market, I exchanged to the Vanguard S&P fund for tax-loss harvesting. When I sought to return to TSM the 500 Index Fund had a significant short-term gain so we decided to stay with the S&P. It is my only stock fund today. Thank you, Jack!

I slightly prefer a total stock market index fund but I see little difference between it and the S&P 500 Index Fund. Both are great stock funds. In my opinion, the best!

Best wishes.
Taylor
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Re: 500 Index preferred over Total Market

Post by Independent George »

For a long time, I did use the S&P 500 over Total Market for a simple behavioral reason: the television in my office's break room was permanently set to CNBC, and would yammer on about the S&P's movement whenever I stopped for a cup of coffee. Rather than wonder about how my largest holding was doing compared to the S&P, I preferred to just go with the S&P even though I know their correlation is something like 0.99.

I started working from home a few years before Covid hit, and have since gone to the Total World Index. Life is much simpler for me now.
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Re: 500 Index preferred over Total Market

Post by Triple digit golfer »

My concern isn't necessarily whether one is better or more complete than the other. My concern is, I am regularly exchanging one for the other. That's what gives me (very mild) heartburn. But at the end of the day, since we expect performance to be very similar moving forward, at any point in time, then, exchanging one for the other shouldn't really be a problem.
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Re: 500 Index preferred over Total Market

Post by Wanderingwheelz »

RAchip wrote: Fri Dec 11, 2020 12:47 pm Total market guarantees that you will own every single one of the worst public companies in the world.

For index investing, I prefer the 500 biggest and best US companies.
Doesn’t it also guarantee that you own every one of the best companies, too? What’s the worst a terrible company can return? What’s the most an amazing company can return?

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Re: 500 Index preferred over Total Market

Post by queso »

I prefer TSM, but have a decent amount of 500 as well since I use that as a tax loss partner for TSM in taxable. I have a lot more of 500 (VINIX) than I'd like to have in a 401k, but that is because they don't offer any other option.
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Re: 500 Index preferred over Total Market

Post by MortgageOnBlack »

When Bogleheads mention Total Stock Market, are they referring to: VTSAX (Vanguard Total Stock Market Index Admiral Shares)?
Also, would the 500 Index be: VFIAX (Vanguard 500 Index Admiral Shares)?

I'm going to start Taxable investing soon and plan on using VTSAX for all of my contributions. I plan to TLH into VFIAX. Would this be an acceptable plan or is there a better Tax Loss partner that is preferred among Bogleheads. I would prefer to use a strategy that is most efficient and keep it long-term. My current retirement accounts are all in VASGX (Vanguard LifeStrategy Growth), but I'm looking to start investing in the individual funds and re-balance myself.
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Re: 500 Index preferred over Total Market

Post by UpperNwGuy »

I consider the 500 Index and Total Market Index to be completely interchangeable in my portfolio. I started in Total Market but tax loss harvested to the 500 Index. If the opportunity arises, I will tax loss harvest back to Total Market. If not, I'm also happy. If I end up owning both funds at some point in the future, that will be fine, too. Trying to figure out which is better is splitting hairs.
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Re: 500 Index preferred over Total Market

Post by stan1 »

Triple digit golfer wrote: Fri Dec 11, 2020 2:01 pm My concern isn't necessarily whether one is better or more complete than the other. My concern is, I am regularly exchanging one for the other. That's what gives me (very mild) heartburn. But at the end of the day, since we expect performance to be very similar moving forward, at any point in time, then, exchanging one for the other shouldn't really be a problem.
That just sounds like the added complexity that comes with a large number of investing accounts and the whole milieu of taxable, Roth IRA, Traditional IRA, Inherited IRA, Roth 401K, Traditional 401K, HSA, 529 and others that accumulate for a married couple with varied joint and individual ownership. Each of which has different tax laws, administrators you can't always change (like 401K), etc.

We have 11 investing accounts and could have a few more (we don't have any 529s or HSAs). It's a bit of a pain to manage but a better problem to have than not having assets to manage at all.
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Triple digit golfer
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Re: 500 Index preferred over Total Market

Post by Triple digit golfer »

MortgageOnBlack wrote: Fri Dec 11, 2020 3:08 pm When Bogleheads mention Total Stock Market, are they referring to: VTSAX (Vanguard Total Stock Market Index Admiral Shares)?
Also, would the 500 Index be: VFIAX (Vanguard 500 Index Admiral Shares)?

I'm going to start Taxable investing soon and plan on using VTSAX for all of my contributions. I plan to TLH into VFIAX. Would this be an acceptable plan or is there a better Tax Loss partner that is preferred among Bogleheads. I would prefer to use a strategy that is most efficient and keep it long-term. My current retirement accounts are all in VASGX (Vanguard LifeStrategy Growth), but I'm looking to start investing in the individual funds and re-balance myself.
I think they're suitable partners. People also use VLCAX (Large Cap Index) which I think has historically tracked the total market just slightly better than the 500 index. I think it was livesoft who said he uses all three as partners.
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Triple digit golfer
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Re: 500 Index preferred over Total Market

Post by Triple digit golfer »

UpperNwGuy wrote: Fri Dec 11, 2020 3:15 pm I consider the 500 Index and Total Market Index to be completely interchangeable in my portfolio. I started in Total Market but tax loss harvested to the 500 Index. If the opportunity arises, I will tax loss harvest back to Total Market. If not, I'm also happy. If I end up owning both funds at some point in the future, that will be fine, too. Trying to figure out which is better is splitting hairs.
Thanks for your candor. Probably better to keep doing what I'm doing (exchanging TSM for 500 Index as needed to keep portfolio stock/bond ratio in balance) than do a big exchange for small caps and then keep trying to keep that ratio approximated moving forward.
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Triple digit golfer
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Re: 500 Index preferred over Total Market

Post by Triple digit golfer »

stan1 wrote: Fri Dec 11, 2020 3:16 pm
Triple digit golfer wrote: Fri Dec 11, 2020 2:01 pm My concern isn't necessarily whether one is better or more complete than the other. My concern is, I am regularly exchanging one for the other. That's what gives me (very mild) heartburn. But at the end of the day, since we expect performance to be very similar moving forward, at any point in time, then, exchanging one for the other shouldn't really be a problem.
That just sounds like the added complexity that comes with a large number of investing accounts and the whole milieu of taxable, Roth IRA, Traditional IRA, Inherited IRA, Roth 401K, Traditional 401K, HSA, 529 and others that accumulate for a married couple with varied joint and individual ownership. Each of which has different tax laws, administrators you can't always change (like 401K), etc.

We have 11 investing accounts and could have a few more (we don't have any 529s or HSAs). It's a bit of a pain to manage but a better problem to have than not having assets to manage at all.
No kidding! It is a good "problem" to have. :sharebeer
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Re: 500 Index preferred over Total Market

Post by RXfiles »

RAchip wrote: Fri Dec 11, 2020 12:47 pm Total market guarantees that you will own every single one of the worst public companies in the world.

For index investing, I prefer the 500 biggest and best US companies.
The number 1 company could take years falling from 1 to 500 and you hold it the entire time. The top 500 now just means they preformed the best in the past.
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Re: 500 Index preferred over Total Market

Post by hi_there »

Basically, it is familiarity bias and brand recognition. Since all financial news tracks S&P 500 as an equity benchmark, investors also gravitate to this index. There's no reason why an arbitrary 500 stocks is better than some random index made by anyone else with any other comparable number of securities.
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Re: 500 Index preferred over Total Market

Post by Aelron »

I consider the two mostly equivalent. I use a 500 fund in taxable accounts because it has a slightly higher proportion of qualified dividends. I use a total market fund in tax-advantaged accounts because of the slight diversification improvement.
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Re: 500 Index preferred over Total Market

Post by rgs92 »

Taylor Larimore has called Total Stock Market the Perfect Investment. I think that says it all.
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colodane
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Re: 500 Index preferred over Total Market

Post by colodane »

Traveller wrote: Fri Dec 11, 2020 12:05 pm I prefer Total Stock Market, but right now have more in the S&P 500 fund due to some excellent tax loss harvesting opportunities which presented themselves earlier this year. New contributions continue to go to Total Market.
I'm in this same situation. Don't have any anxiety about continuing to hold SP500. If TLH beckons in the future, I'll go back to Total Stock Market.
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Re: 500 Index preferred over Total Market

Post by OuterBanks »

When the pandemic hit I moved my 401K from Total Market to 500 Index thinking only big companies are going to have the money to survive this so I might as well try to juice my return a percent or two higher. Turns out I’m now down two percent below Total Market. :oops:
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Re: 500 Index preferred over Total Market

Post by FIREchief »

It's like choosing between filet mignon and NY strip. We could argue the subtleties, but either one beats that hot dog! :P
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Re: 500 Index preferred over Total Market

Post by Marseille07 »

500 Index + NASDAQ-100 on my end. Yes I'm aware there is an overlap.
Ferdinand2014
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Re: 500 Index preferred over Total Market

Post by Ferdinand2014 »

Triple digit golfer wrote: Fri Dec 11, 2020 11:45 am Another thread got me thinking. Are there any Bogleheads who prefer the 500 index over the Total Market. That is, you have access to both, but actually use the 500 index instead of Total Stock. If so, why?

I know of two prominent posters who will likely chime in if they see the thread.

I am thinking about this because I have the 500 index in some accounts (currently contributing to this account) and total market (not currently contributing) in others. When I add to one account with only the 500 index, in order to stay in balance with my overall stock/bond AA, I find myself selling Total Stock in the other account to buy Total Bond.

It gives me very slight hesitation to be regularly exchanging from Total Stock to 500 index. I am considering eliminating Total Stock and exchanging it all for 500 index and holding only the 500 index for my U.S. equity moving forward. Not sure that really makes much sense either, other than I'd be ripping off the band-aid in one fell swoop, so to speak, and then moving forward would be exchanging from apples to apples instead of red apples to green apples.
I prefer the S&P 500.

Why?

1.) Prefer larger cap companies with minimum size requirements
2.) Required to have 4 consecutive quarters of demonstrated profit
3.) High requirements for liquidity and float
4.) Easy to monitor my mutual fund to confirm it is tracking the index
5.) Lots of data and information about what I am investing in.
6.) Larger cap multinational companies give extra tilt to international revenue without as much risk or cost as international investing.
7.) Available in almost every retirement plan regardless of provider

Although all of the above has truth, it has made little performance difference - except 1 extremely important characteristic - it behaviorally has kept me staying the course regardless of the market.
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Re: 500 Index preferred over Total Market

Post by dru808 »

I prefer the Schwab 1000 over the s&p or total market.
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Re: 500 Index preferred over Total Market

Post by dru808 »

OuterBanks wrote: Fri Dec 11, 2020 5:30 pm When the pandemic hit I moved my 401K from Total Market to 500 Index thinking only big companies are going to have the money to survive this so I might as well try to juice my return a percent or two higher. Turns out I’m now down two percent below Total Market. :oops:
Lol...
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Re: 500 Index preferred over Total Market

Post by 000 »

OuterBanks wrote: Fri Dec 11, 2020 5:30 pm When the pandemic hit I moved my 401K from Total Market to 500 Index thinking only big companies are going to have the money to survive this so I might as well try to juice my return a percent or two higher. Turns out I’m now down two percent below Total Market. :oops:
Market timing strikes again!
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Ice-9
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Re: 500 Index preferred over Total Market

Post by Ice-9 »

For many years I WOULD have picked Total Stock Market, but it wasn't offered in my workplace account and S&P 500 Index and Extended Market Index were. I decided since I had to split them up anyway, I may as well overweight Extended Market over the mid and small caps I would have gotten in Total Market. A few years ago, Total Market became available, but I decided by that point I liked my overweight of mid and small and didn't mind the slightly more complex portfolio and kept it in two separate funds.

I actually do similar with International, because I have Fidelity's Zero International fund (mostly large cap) available in one account, and mixing it with Vanguard's All-World ex-US Small-Cap Index Fund in my Roth IRA actually worked out to a lower average ER, even when overweighting the small cap fund.
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Re: 500 Index preferred over Total Market

Post by abuss368 »

Either fund is an excellent choice.
John C. Bogle: “Simplicity is the master key to financial success."
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House Blend
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Re: 500 Index preferred over Total Market

Post by House Blend »

MortgageOnBlack wrote: Fri Dec 11, 2020 3:08 pm I'm going to start Taxable investing soon and plan on using VTSAX for all of my contributions. I plan to TLH into VFIAX. Would this be an acceptable plan or is there a better Tax Loss partner that is preferred among Bogleheads. I would prefer to use a strategy that is most efficient and keep it long-term. My current retirement accounts are all in VASGX (Vanguard LifeStrategy Growth), but I'm looking to start investing in the individual funds and re-balance myself.
I don't speak for other Bogleheads, but in taxable, I use VTSAX and VLCAX (Large Cap Index) as TLH partners.

I prefer the large cap index over 500 index since it (a) holds a few more stocks, and (b) screens stocks based on market cap, not on some wishy-washy "leading companies" nonsense.

It does cost an extra basis point, but I don't mind paying it. (A true cost reckoning should include a tax comparison, which I have not done, but I expect they are similar. In any case, the SEC yield for Large Cap Index is currently 9 basis points lower, which suggests it may currently be tax-cheaper.)

I also have a slight small cap tilt, but do all of the tilting in tax advantaged. So when a loss harvest leaves me with a large slice of VLCAX in taxable, it is not a big deal to allocate a bit more to small cap in tax-advantaged.
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queso
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Re: 500 Index preferred over Total Market

Post by queso »

MortgageOnBlack wrote: Fri Dec 11, 2020 3:08 pm When Bogleheads mention Total Stock Market, are they referring to: VTSAX (Vanguard Total Stock Market Index Admiral Shares)?
Also, would the 500 Index be: VFIAX (Vanguard 500 Index Admiral Shares)?

I'm going to start Taxable investing soon and plan on using VTSAX for all of my contributions. I plan to TLH into VFIAX. Would this be an acceptable plan or is there a better Tax Loss partner that is preferred among Bogleheads. I would prefer to use a strategy that is most efficient and keep it long-term. My current retirement accounts are all in VASGX (Vanguard LifeStrategy Growth), but I'm looking to start investing in the individual funds and re-balance myself.
I can't speak for anybody else, but VTSAX and VFIAX were exactly what I was talking about.
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JoMoney
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Re: 500 Index preferred over Total Market

Post by JoMoney »

I prefer the S&P 500 index to a 'Total Market' styled index. I know Ferdinand has sad as much as well.
I could go into the reasons (again) why I prefer the S&P, but when choosing between the S&P or a 'Total Market' or other broad U.S. large cap index... It's a very trivial point, they are practically the same thing. The S&P 500 is not only .99+ correlated to the Broad-US-Total Market, it's explicitly the intent of the index to be a proxy for it.

That said, I'm also one of those orderly types that can be annoyed if things aren't in neat alignment. I can relate to the desire to have it uniform across all the accounts... it really doesn't make a difference... but the broader recognition of the S&P 500 as the U.S. market index du jour , and what's more available in 401k plans, is part of the reason I'm in it, although I do use it in IRA accounts where I have everything available.
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Re: 500 Index preferred over Total Market

Post by bertilak »

Traveller wrote: Fri Dec 11, 2020 12:05 pm I prefer Total Stock Market, but right now have more in the S&P 500 fund due to some excellent tax loss harvesting opportunities which presented themselves earlier this year. New contributions continue to go to Total Market.
I too TLH'd from TSM to S&P500. I am no longer contributing but if I were it would go to S&P500 just for simplicity's sake. Any rebalancing into equities would also go to S&P500 for the same reason.

EDIT: I am in JoMoney's camp. Re: "It's explicitly the intent of the index to be a proxy for it." They seem to be doing a fine job.
Last edited by bertilak on Sat Dec 12, 2020 11:28 am, edited 2 times in total.
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