VTSAX Weight
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VTSAX Weight
I am curious if anyone knows how the weight of each company is determined for VTSAX.
For example the top 10 holding are:
Microsoft Corp.
Apple Inc.
Alphabet Inc.
Amazon.com Inc.
Facebook Inc.
Berkshire Hathaway Inc.
JPMorgan Chase & Co.
Tesla Inc.
Johnson & Johnson
UnitedHealth Group Inc.
The 10 largest holdings = 22.40% of total net assets
Why didn't Home Depot or Visa make the top 10 and how is the weight of each company determined? Is it someone at Vanguard? How often does the weight of each company change? Does VTSAX change on a daily basis with new companies coming in and out and does their weight change all the time?
For example the top 10 holding are:
Microsoft Corp.
Apple Inc.
Alphabet Inc.
Amazon.com Inc.
Facebook Inc.
Berkshire Hathaway Inc.
JPMorgan Chase & Co.
Tesla Inc.
Johnson & Johnson
UnitedHealth Group Inc.
The 10 largest holdings = 22.40% of total net assets
Why didn't Home Depot or Visa make the top 10 and how is the weight of each company determined? Is it someone at Vanguard? How often does the weight of each company change? Does VTSAX change on a daily basis with new companies coming in and out and does their weight change all the time?
- arcticpineapplecorp.
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Re: VTSAX Weight
it's definitely not someone "at Vanguard". Since the fund is market capitalization weighted the percentages of each stock matches it's weight in the market cap. At one point people were worried that Apple made up 6% of the total market (it's less now, keep reading). So if Apple made up 6% of the total market in the past, that's how it was weighted in the total stock market index fund.tvubpwcisla wrote: ↑Sat Jun 19, 2021 5:44 pm I am curious if anyone knows how the weight of each company is determined for VTSAX.
For example the top 10 holding are:
Microsoft Corp.
Apple Inc.
Alphabet Inc.
Amazon.com Inc.
Facebook Inc.
Berkshire Hathaway Inc.
JPMorgan Chase & Co.
Tesla Inc.
Johnson & Johnson
UnitedHealth Group Inc.
The 10 largest holdings = 22.40% of total net assets
Why didn't Home Depot or Visa make the top 10 and how is the weight of each company determined? Is it someone at Vanguard? How often does the weight of each company change? Does VTSAX change on a daily basis with new companies coming in and out and does their weight change all the time?
If you look at the annual report (https://personal.vanguard.com/funds/rep ... 2210170731) which can be found here: https://personal.vanguard.com/us/faces/ ... ducts=true
you can see on page 51 Apple makes up $52,227,139,000.00 of the total fund. On page 10 the total funds market value is $1,075,207,407,000.00. So $52,227,139,000 / $1,075,207,407,000.00 = .048 or 4.8% of the fund. So Apple makes up 4.8% of the total assets. You can replicate with the other top 9 holdings if you desire.
Does that makes sense?
p.s.
home depot (page 51) makes up $8,058,206,000.00. So it makes up $8,058,206,000.00 / $1,075,207,407,000.00 = .0074 or 0.74% of the fund. That's clearly less than Apple and why it's not in the top 10.
Similarly Visa (page 9) makes up $10,384,282,000.00 of the total fund. So if it makes up $10,384,282,000.00 / $1,075,207,407,000.00 = .00965 or 0.96% of the fund.
That's clearly less too, which is why it's not in the top 10.
Does that help?
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Re: VTSAX Weight
It's not determined by anybody except the collective market. It is based on market capitalization. If Company A has 100 shares outstanding at $10 each, that's a $1,000 market cap. If the sum of the market caps of all companies in the market totals $100,000, then Company A will make up 1% of the index.
Re: VTSAX Weight
Technically “free float market cap”. You don’t count the shares that are locked away from the market. Mostly these are founder shares or shares held by another company. i.e., the shares held by BRK. You don’t want to double count shares.Triple digit golfer wrote: ↑Sat Jun 19, 2021 8:30 pm It's not determined by anybody except the collective market. It is based on market capitalization.
This requires some subjective judgements by the index provider.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: VTSAX Weight
I'm curious (& confused). If VTSAX tracks the Russell 1000,why does it hold 3700 equities (is it entirely explained by multiple stock classes?)?
Living The Dream
Re: VTSAX Weight
It doesn't track the Russell 1000. Why would you think that?LivingTheDream wrote: ↑Sat Jun 19, 2021 8:46 pm I'm curious (& confused). If VTSAX tracks the Russell 1000,why does it hold 3700 equities (is it entirely explained by multiple stock classes?)?
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Re: VTSAX Weight
my mistake... I was looking at the index referenced on morningstarNate79 wrote: ↑Sat Jun 19, 2021 8:48 pmIt doesn't track the Russell 1000. Why would you think that?LivingTheDream wrote: ↑Sat Jun 19, 2021 8:46 pm I'm curious (& confused). If VTSAX tracks the Russell 1000,why does it hold 3700 equities (is it entirely explained by multiple stock classes?)?
Living The Dream
Re: VTSAX Weight
And here's a real-life example involving Apple Inc. (AAPL).Triple digit golfer wrote: ↑Sat Jun 19, 2021 8:30 pm It's not determined by anybody except the collective market. It is based on market capitalization. If Company A has 100 shares outstanding at $10 each, that's a $1,000 market cap. If the sum of the market caps of all companies in the market totals $100,000, then Company A will make up 1% of the index.
On Friday June 18, the price of AAPL closed at 130.46.
https://finance.yahoo.com/quote/AAPL/
There are 16,688 million total shares outstanding.
https://www.nasdaq.com/market-activity/ ... l-holdings
130.46 x 16688000000 = 2.177 trillion market capitalization, which is also listed on the first link.
May all your index funds gain +0.5% today.
- arcticpineapplecorp.
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Re: VTSAX Weight
in reference to home depot and visa mentioned by OP and I mentioned Apple...
Apple should make up a larger portion of the total stock market index fund than visa and visa makes up a larger part than home depot because:
$2.18 Trillion market cap - Apple (https://www.google.com/search?client=fi ... pple+stock)
$491.42 Billion Market Cap - Visa (https://www.google.com/search?client=fi ... visa+stock)
$321.75 Billion Market Cap - Home Depot (https://www.google.com/search?client=fi ... epot+stock)
The companies that make up the largest market cap get to be the ones that make up the largest part of the index fund that represents the total market. makes sense to me.
The last of the top 10 the OP mentioned was United Health Group. It's market cap is:
$367.45 Billion (https://www.google.com/search?client=fi ... roup+stock)
Clearly that's larger than Home Depot, but I do see that Visa's market cap is larger than United Health Group's market cap.
so that does beg the question why isn't Visa in the top 10 instead of United Health Group.
It's possible that United Health group was larger than Visa as of 5/31/2021 (when that list of month end 10 largest holdings was last published). Since then perhaps some reversal has happened with united health group and Visa. So it's possible that when it gets updated next at Vanguard the top 10 will look different. Companies do change size over time:
https://americanbusinesshistory.org/lar ... 1994-2018/
Apple should make up a larger portion of the total stock market index fund than visa and visa makes up a larger part than home depot because:
$2.18 Trillion market cap - Apple (https://www.google.com/search?client=fi ... pple+stock)
$491.42 Billion Market Cap - Visa (https://www.google.com/search?client=fi ... visa+stock)
$321.75 Billion Market Cap - Home Depot (https://www.google.com/search?client=fi ... epot+stock)
The companies that make up the largest market cap get to be the ones that make up the largest part of the index fund that represents the total market. makes sense to me.
The last of the top 10 the OP mentioned was United Health Group. It's market cap is:
$367.45 Billion (https://www.google.com/search?client=fi ... roup+stock)
Clearly that's larger than Home Depot, but I do see that Visa's market cap is larger than United Health Group's market cap.
so that does beg the question why isn't Visa in the top 10 instead of United Health Group.
It's possible that United Health group was larger than Visa as of 5/31/2021 (when that list of month end 10 largest holdings was last published). Since then perhaps some reversal has happened with united health group and Visa. So it's possible that when it gets updated next at Vanguard the top 10 will look different. Companies do change size over time:
https://americanbusinesshistory.org/lar ... 1994-2018/
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 |
Re: VTSAX Weight
Maybe I'm just tired and not thinking clearly but doesn't BRK's large holding of Apple stock get double counted? As in you own even more Apple than you think?
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Re: VTSAX Weight
BRK has moderate correlation to stocks for which it holds a large position. BRK's profit comes from much more than the stocks it holds. BRK is not the only company that holds stock of other companies.
Re: VTSAX Weight
VTSAX tracks CRSP US Total Market Index, which is also used by academic research.
http://www.crsp.org/products/investment ... rket-index
http://www.crsp.org/products/investment ... rket-index
Re: VTSAX Weight
See my post up thread. Free float market cap is used to avoid double counting.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: VTSAX Weight
The question is how to assess BRK's holdings with respect to float determination. BRK does sometimes liquidate a position.
Last edited by Northern Flicker on Mon Jun 21, 2021 1:01 am, edited 1 time in total.
Re: VTSAX Weight
Edger.govNorthern Flicker wrote: ↑Sun Jun 20, 2021 12:25 pm The question is how assess BRK's holdings with respect to float determination. BRK does dometimes liquidate a position.
The big boys have to regularly file with the SEC what they hold, if they have bought or sold, or are planning to buy or sell.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
- oldcomputerguy
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Re: VTSAX Weight
Just for reference, VTSAX benchmarks against and attempts to track the CRSP US Total Market Index.LivingTheDream wrote: ↑Sat Jun 19, 2021 9:02 pmmy mistake... I was looking at the index referenced on morningstarNate79 wrote: ↑Sat Jun 19, 2021 8:48 pmIt doesn't track the Russell 1000. Why would you think that?LivingTheDream wrote: ↑Sat Jun 19, 2021 8:46 pm I'm curious (& confused). If VTSAX tracks the Russell 1000,why does it hold 3700 equities (is it entirely explained by multiple stock classes?)?
ETA: Hmm, I see acegolfer beat me to it.
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Re: VTSAX Weight
I didn't mean how they get the data, but how they decide how much to include in the float. That BRK sometimes liquidates a position means that it may not be correct to assume BRK holdings are not in the index's float.alex_686 wrote: ↑Sun Jun 20, 2021 2:36 pmEdger.govNorthern Flicker wrote: ↑Sun Jun 20, 2021 12:25 pm The question is how assess BRK's holdings with respect to float determination. BRK does dometimes liquidate a position.
The big boys have to regularly file with the SEC what they hold, if they have bought or sold, or are planning to buy or sell.
Re: VTSAX Weight
You would never include any of BRK’s holding in the free float. Doing so would double count the value of the shares. Once in the underlying company’s market cap, once on BRK’s market cap.Northern Flicker wrote: ↑Mon Jun 21, 2021 1:00 am I didn't mean how they get the data, but how they decide how much to include in the float. That BRK sometimes liquidates a position means that it may not be correct to assume BRK holdings are not in the index's float.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.