Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Topic Author
buckeye7983
Posts: 248
Joined: Fri Jun 27, 2008 12:35 pm

Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by buckeye7983 »

Excellent article at WSJ.com today discusses the rise of and dominant size of Vanguard Total Stock Market Index fund ($1.3 trillion,10% of all assets in U.S. stock mutual funds and ETFs in the market).

https://www.wsj.com/articles/mutual-fun ... _lead_pos8

The article discusses the outperformance of VTI as compared to S&P 500 based index funds in 2020, in part due to Tesla:
Partly because Tesla was in the CRSP index, the index’s 2020 return of 20.99% (and that of the Vanguard fund) beat the S&P 500 by 2.59 percentage points, the widest margin of outperformance by either index since 2013, according to Bull and Bear Profits, an investment newsletter.
Are there compelling reasons why one would choose an S&P500 based index fund instead of VTI/VTSAX?

Cheers! :sharebeer
Booogle
Posts: 605
Joined: Wed Nov 09, 2016 2:57 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Booogle »

Don't forget about VV.

VV would be the large and mid cap subsection of VTI.

(VO is actually 100% part of VV).

So it should have caught nearly all of Tesla's growth.
6NDone
Posts: 153
Joined: Tue Sep 28, 2021 5:01 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by 6NDone »

Booogle wrote: Sun Dec 05, 2021 6:22 am Don't forget about VV.

VV would be the large and mid cap subsection of VTI.

(VO is actually 100% part of VV).

So it should have caught nearly all of Tesla's growth.
VV contains 600 stock, most of which is the S&P 500.
VO contains 380 stocks.

VV cannot contain 100% of VO. VV contains only about 17% mid caps .
100% US TSM
UpperNwGuy
Posts: 9446
Joined: Sun Oct 08, 2017 7:16 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by UpperNwGuy »

Booogle wrote: Sun Dec 05, 2021 6:22 am Don't forget about VV.

VV would be the large and mid cap subsection of VTI.

(VO is actually 100% part of VV).

So it should have caught nearly all of Tesla's growth.
I don't understand how either VV or VO relate to the OPs question as to whether we should be investing in VTI vs VOO.
User avatar
markjk
Posts: 540
Joined: Wed Oct 07, 2020 6:01 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by markjk »

I read the article earlier this morning as well. Great read.

The S&P 500 is more selective and therefore could have an advantage in some situations. For me, the total market is the better option of the two because it actually covers the entire market, not just a subset. However, I think it's a super slim advantage. I like both fund types and if the total market isn't available, I go with the S&P 500 fund without issue. I also don't argue with folks that like the S&P 500 over a total market fund. Again, it's so close and you can find years/data that support one argument over the other.
Booogle
Posts: 605
Joined: Wed Nov 09, 2016 2:57 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Booogle »

6NDone wrote: Sun Dec 05, 2021 6:45 am
Booogle wrote: Sun Dec 05, 2021 6:22 am Don't forget about VV.

VV would be the large and mid cap subsection of VTI.

(VO is actually 100% part of VV).

So it should have caught nearly all of Tesla's growth.
VV contains 600 stock, most of which is the S&P 500.
VO contains 380 stocks.

VV cannot contain 100% of VO. VV contains only about 17% mid caps .

100% of VO is in VV.

Use an ETF overlap tool.

Or look at CRSP's terminology.
User avatar
Peculiar_Investor
Site Admin
Posts: 2431
Joined: Thu Oct 20, 2011 12:23 am
Location: Calgary, AB 🇨🇦
Contact:

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Peculiar_Investor »

buckeye7983 wrote: Sun Dec 05, 2021 6:03 am
WSJ article wrote:Partly because Tesla was in the CRSP index, the index’s 2020 return of 20.99% (and that of the Vanguard fund) beat the S&P 500 by 2.59 percentage points, the widest margin of outperformance by either index since 2013, according to Bull and Bear Profits, an investment newsletter.
Are there compelling reasons why one would choose an S&P500 based index fund instead of VTI/VTSAX?
I think the answer lies within the quote. "the widest margin of outperformance by either index since 2013" would seem to indicate to me that both the S&P 500 index and the CRSP index have outperformed at different times. The article gives no further information as to whether or not one index should continually outperform the other index.

As passive investors, the point isn't about chasing outperformance however. Outperformance is only known after the fact, so I wouldn't put too much emphasis on one year's outperformance. That is just a blip on the radar screen (or stock chart).

Personally I've chosen to use Vanguard’s Total Stock Market Fund (VTI) because it gives me the broadest based index fund with US equity coverage at a low cost.
Normal people… believe that if it ain’t broke, don’t fix it. Engineers believe that if it ain’t broke, it doesn’t have enough features yet. – Scott Adams
Swansea
Posts: 1528
Joined: Sat Feb 13, 2016 4:16 am

Vanguard Total Stock Market Fund

Post by Swansea »

[Thread merged into here --admin LadyGeek]

I was surprised to read in the WSJ that the Total Stock Market fund uses Center for Research Security Prices to follow and not the Wilshire 5000.
alex_686
Posts: 13286
Joined: Mon Feb 09, 2015 1:39 pm

Re: Vanguard Total Stock Market Fund

Post by alex_686 »

Why?

Vanguard contracted with CRSP to create a “store label” index at a dirt cheap price. Right now one of the fund’s biggest expenses is licensing the index. And much like Coke Cola you are mostly buying the branding, not the actual work that goes into the product.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
Booogle
Posts: 605
Joined: Wed Nov 09, 2016 2:57 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Booogle »

NTSX is market cap weighted like Vanguard's CRSP funds.

And it has 60% intermediate treasuries.

Its win, win, win.

Its probably the most underrated ETF of all time.
sycamore
Posts: 6309
Joined: Tue May 08, 2018 12:06 pm

Re: Vanguard Total Stock Market Fund

Post by sycamore »

Yeah, Vanguard changed their index providers a while ago.

To find what & when they changed, I browse to the "Price and performance" page for a fund. For VTSAX it's https://investor.vanguard.com/mutual-fu ... ance/vtsax. Scroll down to the very bottom and look for a footnote.
* Dow Jones U.S. Total Stock Market Index (formerly known as the Dow Jones Wilshire 5000 Index) through April 22, 2005; MSCI US Broad Market Index through June 2, 2013; and CRSP US Total Market Index thereafter.
So that's the benchmark they use for comparison purposes but it also reflects the index the fund followed.

This info can also be found in the Bogleheads wiki, https://www.bogleheads.org/wiki/Vanguar ... d_expenses.
UpperNwGuy
Posts: 9446
Joined: Sun Oct 08, 2017 7:16 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by UpperNwGuy »

Booogle wrote: Sun Dec 05, 2021 9:16 am NTSX is market cap weighted like Vanguard's CRSP funds.

And it has 60% intermediate treasuries.

Its win, win, win.

Its probably the most underrated ETF of all time.
Why is NTSX discussed so infrequently here on bogleheads?
UpperNwGuy
Posts: 9446
Joined: Sun Oct 08, 2017 7:16 pm

Re: Vanguard Total Stock Market Fund

Post by UpperNwGuy »

Swansea wrote: Sun Dec 05, 2021 8:58 am I was surprised to read in the WSJ that the Total Stock Market fund uses Center for Research Security Prices to follow and not the Wilshire 5000.
Does this disappoint you? If so, why?
Booogle
Posts: 605
Joined: Wed Nov 09, 2016 2:57 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Booogle »

UpperNwGuy wrote: Sun Dec 05, 2021 9:25 am
Booogle wrote: Sun Dec 05, 2021 9:16 am NTSX is market cap weighted like Vanguard's CRSP funds.

And it has 60% intermediate treasuries.

Its win, win, win.

Its probably the most underrated ETF of all time.
Why is NTSX discussed so infrequently here on bogleheads?

There are a ton of interesting funds rarely discussed anywhere.

Like PCFIX (which should only be used in an IRA).
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nisiprius »

Searching for the "best" is just going to keep you in a state of anxiety and constantly changing your portfolio when what you should be doing is leaving it alone. John C. Bogle wrote
Successful investing involves doing just a few things right and avoiding serious mistakes.
A total stock market index fund is an excellent way to capture U.S. equity returns. It's what I use myself (in my case, VTSAX which is the mutual fund version of VTI). It's what I recommend.

The article is really about the CRSP index specifically, and it's interesting. Several big firms offer total stock market index funds, tracking different providers' total stock market index funds, and I feel there's no compelling reason to choose one over another. CRSP, Dow Jones Total Stock Market Index (not the Dow Jones Industrial Average, which is completely different), Russell 3000... pretty much the same.

There must be well over a dozen offering S&P 500 index funds. There is no compelling reason for choosing total market funds over S&P 500 funds. There is no compelling reason for choosing S&P 500 funds over total market funds. Wherever there is a difference, people will have differing opinions on what is "best." The important things to keep in mind are:
  • A low-cost total market or S&P 500 index fund is an excellent way to capture U.S. equity returns.
  • The difference doesn't matter much.
  • Nobody can really say which is "best."
Here is a chart of Total Stock--VTSMX, the oldest version of the fund--and VFINX, the oldest S&P 500 fund--showing five year moving averages.

a) they've never been very far apart,
b) the small differences have leapfrogged each other.

Image

As you see, the biggest differences ever were:

4/1994 through 3/1999: Total market fund 23.31%, S&P 500 fund 26.16%
4/2001 through 3/2006: Total market fund 5.77%, S&P fund 3.84%

So average annual returns averaged over 60-month periods have never been more than about 2% different from each other.

But meanwhile, the difference between the worst and best five-year periods for the S&P 500 fund were:

3/2004 through 2/2009: -6.73%
1/1995 through 12/1999: 28.49%

Your choice of which index to use potentially could have made a difference of 2%.
The fluctuations of the stock market made a difference 35%.

We can see this even in the most recent data. The article mentions that the total stock market index beat the S&P 500 "partly because [of] Tesla." But over the past 60 months, the S&P 500 ETF, VOO, beat, or perhaps we should say tied, VTI:

Image

As for "CRSP versus rivals," here are four funds tracking three different total market indexes. Vanguard tracks the CRSP total market index; Fidelity and Schwab use the Dow Jones Total Stock Market Index (not the Dow Jones Industrial Average); iShares uses the Russell 3000.

Source

Image
Last edited by nisiprius on Sun Dec 05, 2021 10:29 am, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nisiprius »

Here is a random list of not-at-all-compelling reasons why a sane investor could choose an S&P 500 index fund over a total stock market index fund.

a) "I recommend the S&P 500 index fund."--Warren Buffett, 2021 and many times before. An S&P 500 index fund is what he backed in his ten-year bet with Ted Seides. He always talks about "an S&P 500 fund." As far as I know, he never has explained whether he means an S&P 500 fund in preference to a total market fund.

b) There are a lot more S&P 500 funds and ETFs available to choose from than there are total market funds. In particular, many 401(k) plans offer an S&P 500 as the only one-fund broad market choice.

c) Some people feel attuned to the S&P 500's selection rules and feel sure that the selection rules choose better companies and that better companies must translate into better long-term performance.

d) Some people just like the S&P 500 "brand." They've been seeing it on news shows since 1957 and nobody ever mentions any total market stock index, let alone the CRSP index.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by burritoLover »

The S&P committee drug their feet on Tesla and did not add it to the 500 index even when it finally met their profitability metrics. That's the problem with the S&P 500 - you've got people making active decisions at times and not just due to making costs / liquidity reasonable for index followers. A total stock market index will have less of these active-managey type decisions.
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nisiprius »

A few words about the S&P 500's committee selection, because I feel this is often distorted a bit, particularly by people talking against index funds in general.

The S&P 500 is an index of five hundred "leading companies in leading industries." That means 505 stocks because five of them issue more than one share class.

The reason for it being "leading companies in leading industries" and not "the 500 companies with the largest market cap" is because in 1957, people didn't think of market cap as a natural or important criterion. In a vague way people assumed that the big stocks of good companies were the mainstream market, and that little companies were a kind of sideshow for speculators.

This changed in 1981 when an economist, Rolf Banz, published a paper that reported that the stocks of "small firms" had had higher risk-adjusted returns than the market as a whole. Problems in the data set exaggerated the size of the effect. Anyway, this touched off almost a fetish for small-cap stocks. People began to think of small-caps, mid-caps, and large-caps as obvious, natural categories.

S&P was not intending to produce a curated set of stocks, or, at least, not a cleverly selected one. They basically wanted a) an index that could be computed hourly, that b) covered as much of the market as possible. In 1957, 500 stocks was the limit. In fact,"The Datatron machine that computes the new index [is] in the Boston laboratories of Melpar, Inc," there apparently not being anything suitable in New York. But they had to choose the stocks somehow.

The goal was for the S&P 500 to include at least 90% of the market by capitalization, and initially it actually included more than 94%.
Last edited by nisiprius on Sun Dec 05, 2021 11:19 am, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
burritoLover
Posts: 4097
Joined: Sun Jul 05, 2020 12:13 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by burritoLover »

I'm curious if there is any "500" indexes that are simply the 500 largest companies by market cap evaluated say, once a year. It isn't like we are talking about illiquid small stocks here. It seems you could have a simple rules-based strategy to handle this. Maybe that is what the CSRP is.
Booogle
Posts: 605
Joined: Wed Nov 09, 2016 2:57 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Booogle »

burritoLover wrote: Sun Dec 05, 2021 10:33 am I'm curious if there is any "500" indexes that are simply the 500 largest companies by market cap evaluated say, once a year.
NTSX has the 500 largest American companies by market cap.

(Some articles say it contains S&P 500, but they are wrong.)
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nisiprius »

Side topic. Exercise for the reader.

According to Wikipedia*, The "S&P 500" index includes 505 stocks. Five companies are represented by two ticker symbols:

GOOG, GOOGL (Alphabet Inc.)
BRK.A, BRK.B (Berkshire Hathaway Inc.)
FOX, FOXA (Fox Corp.)
NWS, NWSA (News Corp.)
UA, UAA (Under Armour Inc.)

Why doesn't this result in overweighting these five companies?

:D


(It might be out of date, because the listed holdings for VOO as of 7/31/2021 also included DISCA and DISCK for Discovery, Inc. and LEN and LEN.B for Lennar Corp).
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nisiprius »

burritoLover wrote: Sun Dec 05, 2021 10:33 am I'm curious if there is any "500" indexes that are simply the 500 largest companies by market cap evaluated say, once a year. It isn't like we are talking about illiquid small stocks here. It seems you could have a simple rules-based strategy to handle this. Maybe that is what the CSRP is.
The CRSP is a firm and they provide many different indexes. The WSJ article is about one of them, the CRSP US Total Market Index.

CRSP also provides a CRSP U.S. Large Cap Index. It's tracked by the Vanguard Large-Cap Index Fund, VLCAX, and ETF, VV. Rather than including the 500 largest-cap stocks,
The CRSP US Large Cap Index includes U.S. companies that comprise the top 85% of investable market capitalization.
Maybe an arbitrary percentage-of-total-market-cap cutoff makes more sense than an arbitrary number-of-stocks cutoff. Anyway, it currently happens to contain 581 companies.

And for a long time, there has been the Russell 1000 index, which includes 1,000, not 500, but in a rules-based way based on capitalization, and a decent handful of funds and ETFs tracking it, include Vanguard's VONE.

The CRSP was founded because Merrill Lynch, at that time, ran occasional full-newspaper-page-sized ads--analogous to informercials--teaching investors about the stock market. They wanted to run one saying that common stocks were a prudent long-term investment for small investors. The SEC wouldn't let them publish it without evidence, so Merrill Lynch funded a project at the University of Chicago School of Business to research and produce that evidence.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
nedsaid
Posts: 19249
Joined: Fri Nov 23, 2012 11:33 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nedsaid »

Peculiar_Investor wrote: Sun Dec 05, 2021 8:15 am
I think the answer lies within the quote. "the widest margin of outperformance by either index since 2013" would seem to indicate to me that both the S&P 500 index and the CRSP index have outperformed at different times. The article gives no further information as to whether or not one index should continually outperform the other index.

As passive investors, the point isn't about chasing outperformance however. Outperformance is only known after the fact, so I wouldn't put too much emphasis on one year's outperformance. That is just a blip on the radar screen (or stock chart).

Personally I've chosen to use Vanguard’s Total Stock Market Fund (VTI) because it gives me the broadest based index fund with US equity coverage at a low cost.
This is a very good post. I would think that a Total Stock Market Index would outperform the S&P 500 during some time periods and perhaps during other time periods the S&P 500 would outperform the Total Stock Market Index. Have to do some thinking to come up with the causes of both scenarios but over time it should pretty much even out. Given a choice, I would rather be in the Total Stock Market Index, a big reason being the Tesla effect described earlier.

Channeling Winston Churchill, the Total Stock Market Index is the worst possible method to capture the returns for the stock market except for all of the others.
A fool and his money are good for business.
User avatar
nedsaid
Posts: 19249
Joined: Fri Nov 23, 2012 11:33 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nedsaid »

burritoLover wrote: Sun Dec 05, 2021 10:18 am The S&P committee drug their feet on Tesla and did not add it to the 500 index even when it finally met their profitability metrics. That's the problem with the S&P 500 - you've got people making active decisions at times and not just due to making costs / liquidity reasonable for index followers. A total stock market index will have less of these active-managey type decisions.
A very good post. Yes is a possible advantage for the Total Stock Market Index over the S&P 500.
A fool and his money are good for business.
User avatar
nedsaid
Posts: 19249
Joined: Fri Nov 23, 2012 11:33 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nedsaid »

I have to applaud Nisiprius, who serves many functions here. He is sort of our Poet Laureate, our resident historian, and many posts evaluating Academic Theories vs. Real Life results through actual funds that investors could have invested in. He also took on the assertions of people like Larry Swedroe through use of those real life examples. Thank you for your posts here in this thread and elsewhere on the forum.
A fool and his money are good for business.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by LadyGeek »

I merged Swansea's thread into a similar discussion.

(Thanks to the member who reported the post and provided a link to this thread.)
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
dru808
Posts: 1662
Joined: Sat Oct 15, 2011 2:42 pm
Location: mid pac

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by dru808 »

nedsaid wrote: Sun Dec 05, 2021 12:07 pm
burritoLover wrote: Sun Dec 05, 2021 10:18 am The S&P committee drug their feet on Tesla and did not add it to the 500 index even when it finally met their profitability metrics. That's the problem with the S&P 500 - you've got people making active decisions at times and not just due to making costs / liquidity reasonable for index followers. A total stock market index will have less of these active-managey type decisions.
A very good post. Yes is a possible advantage for the Total Stock Market Index over the S&P 500.
It was a big deal to some, saying the 500 was buying high and it will have a negative impact to the s&p index. Did it affect the s&p investors negatively at all?
1 fund
User avatar
nedsaid
Posts: 19249
Joined: Fri Nov 23, 2012 11:33 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nedsaid »

dru808 wrote: Sun Dec 05, 2021 12:22 pm
nedsaid wrote: Sun Dec 05, 2021 12:07 pm
burritoLover wrote: Sun Dec 05, 2021 10:18 am The S&P committee drug their feet on Tesla and did not add it to the 500 index even when it finally met their profitability metrics. That's the problem with the S&P 500 - you've got people making active decisions at times and not just due to making costs / liquidity reasonable for index followers. A total stock market index will have less of these active-managey type decisions.
A very good post. Yes is a possible advantage for the Total Stock Market Index over the S&P 500.
It was a big deal to some, saying the 500 was buying high and it will have a negative impact to the s&p index. Did it affect the s&p investors negatively at all?
Nothing is perfect and that includes the S&P 500 Index. Over time, it has been an incredible investment. But yes, things like this happen but there might be a time in the future when a decision by the S&P Committee to exclude a certain stock will work to the advantage of the S&P 500 Index over the Total Stock Market.

It is certainly a lot better construction of an Index compared to the Dow 30.

These sort of anomalies happen in the markets all of the time and being upset over S&P buying Tesla at a high seems like crying over spilt milk. Sort of like saying I would be long retired if I had put all of my money in Microsoft from the time I started working in the early 1980's, see how much money that I lost by diversifying? I could be agonizing over this but in reality I probably wasn't aware when Microsoft became public. I could have just as easily put all of my money into a Tech Company that went bust. I wouldn't be jumping from a window in a skyscraper because I had my money in the S&P 500 rather than the Total Stock Market Index.
A fool and his money are good for business.
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nisiprius »

dru808 wrote: Sun Dec 05, 2021 12:22 pm...It was a big deal to some, saying the 500 was buying high and it will have a negative impact to the s&p index. Did it affect the s&p investors negatively at all?...
This is a three-month section of the growth chart for VOO, the Vanguard S&P 500 Index ETF. It includes December 21st, 2020, the date when Tesla was added to the S&P 500. I removed the dates and gridlines.

It was widely suggested that this would be a hugely important event, likely roiling the stock market as a whole. It was often suggested that it would be terribly harmful to S&P 500 index fund investors, who would being forced to buy Tesla stock at elevated prices.

One of these arrows points to the date on which Tesla was added to the S&P 500. Which one?

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
buyer
Posts: 52
Joined: Tue Jul 20, 2021 1:25 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by buyer »

nisiprius wrote: Sun Dec 05, 2021 9:54 am As for "CRSP versus rivals," here are four funds tracking three different total market indexes. Vanguard tracks the CRSP total market index; Fidelity and Schwab use the Dow Jones Total Stock Market Index (not the Dow Jones Industrial Average); iShares uses the Russell 3000.
ITOT from iShares tracks the S&P Total Market Index (TMI) and has 4,089 stocks, so it would be a better comparison than their Russell 3000 fund.
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by nisiprius »

buyer wrote: Sun Dec 05, 2021 1:03 pm
nisiprius wrote: Sun Dec 05, 2021 9:54 am As for "CRSP versus rivals," here are four funds tracking three different total market indexes. Vanguard tracks the CRSP total market index; Fidelity and Schwab use the Dow Jones Total Stock Market Index (not the Dow Jones Industrial Average); iShares uses the Russell 3000.
ITOT from iShares tracks the S&P Total Market Index (TMI) and has 4,089 stocks, so it would be a better comparison than their Russell 3000 fund.
My point is that it just doesn't matter much.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Lastrun
Posts: 1505
Joined: Wed May 03, 2017 6:46 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Lastrun »

nisiprius wrote: Sun Dec 05, 2021 9:54 am Searching for the "best" is just going to keep you in a state of anxiety and constantly changing your portfolio when what you should be doing is leaving it alone.
I think one aspect of a total stock market ETF or fund, versus and S&P 500 is behavioral to me. Because of a variety of factors, I have significant amounts of both VOO and VTI--and the VOO bothers me ever so slightly in that I wish I was just total market. I know that it will not make a difference in the long run, but I have this irrational fear of missing out by not having everything in a total market fund. Sure, I understand that the weight of these last 2000 or so stocks is very small, but I "feel" better owning at least a piece of each of them.

So behaviorally a total stock market fund is better for me.
User avatar
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Taylor Larimore »

nedsaid wrote: Sun Dec 05, 2021 12:13 pm I have to applaud Nisiprius, who serves many functions here. He is sort of our Poet Laureate, our resident historian, and many posts evaluating Academic Theories vs. Real Life results through actual funds that investors could have invested in. He also took on the assertions of people like Larry Swedroe through use of those real life examples. Thank you for your posts here in this thread and elsewhere on the forum.
nedsaid:

I agree with you.

Thank you, Nisiprius.

Taylor
Jack Bogle's Word of Wisdom: “Success in short can be measured, not in what we attain for ourselves, but in what we contribute to society.”
"Simplicity is the master key to financial success." -- Jack Bogle
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Triple digit golfer »

While I get the sentiment, the S&P 500 lagged the total market by 2.62% and lagged the large cap index by 2.66% in 2020. I used all Vanguard funds.

This is a huge miss, and I suspect almost all of the difference is the Tesla factor.

You can argue it didn't hurt the S&P 500 much, but I prefer to look at the opportunity cost.

If one holds all their money in U.S. equities (many do) and has a modest-for-Bogleheads $500,000 portfolio, this is a five figure opportunity cost.

Let's just call it what it is. The S&P 500 committee blew it or the methodology is flawed. This is to be expected from time to time.

I still continue to use the S&P 500 as my "total stock market" in my 401(k) and also hold it in a taxable account. It makes up about 40% of my overall portfolio.
Novice2020
Posts: 85
Joined: Sat May 25, 2019 10:32 am

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Novice2020 »

Silly question, but when they say VTSAX and VTI have $1.4 trillion...Does that figure also include the numerous Vanguard Target Date funds, many of which are in 401K plans, which hold an equivalent of VTSAX, but often without the VTSAX Label? For example, mine is:

Vanguard Total Stock Mkt Idx Instl Pls

But I think technically this is different than VTSAX, though on the back end it is probably identical? Just curious if the 1.4 trillion figure includes people like me who hold VTSAX equivalents in their 401K plan.
VTI
Posts: 282
Joined: Sat Mar 13, 2021 11:56 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by VTI »

UpperNwGuy wrote: Sun Dec 05, 2021 9:25 am
Booogle wrote: Sun Dec 05, 2021 9:16 am NTSX is market cap weighted like Vanguard's CRSP funds.

And it has 60% intermediate treasuries.

Its win, win, win.

Its probably the most underrated ETF of all time.
Why is NTSX discussed so infrequently here on bogleheads?
Personally, I avoid NTSX due to its poor liquidity, and the (related?) fact that its day-to-day price seems all over the place, divorced from its underlying holdings.
nisiprius wrote: Sun Dec 05, 2021 10:08 am Here is a random list of not-at-all-compelling reasons why a sane investor could choose an S&P 500 index fund over a total stock market index fund.

a) "I recommend the S&P 500 index fund."--Warren Buffett, 2021 and many times before. An S&P 500 index fund is what he backed in his ten-year bet with Ted Seides. He always talks about "an S&P 500 fund." As far as I know, he never has explained whether he means an S&P 500 fund in preference to a total market fund.

b) There are a lot more S&P 500 funds and ETFs available to choose from than there are total market funds. In particular, many 401(k) plans offer an S&P 500 as the only one-fund broad market choice.

c) Some people feel attuned to the S&P 500's selection rules and feel sure that the selection rules choose better companies and that better companies must translate into better long-term performance.

d) Some people just like the S&P 500 "brand." They've been seeing it on news shows since 1957 and nobody ever mentions any total market stock index, let alone the CRSP index.
Good list! I own VTSAX (total market), not VFIAX (S&P 500), but I've been leaning toward the latter recently.

I'll add a small addition to point C: Some folks suspect that if there is a "bubble bursting" event, the more proven S&P companies will fair better than the rest. (In other words, less volatility when you really don't want volatility.)

And a small addition to point D: The S&P 500's performance is reported everywhere, and it could be comforting knowing that your fate and fortune is fully invested in something that your fellow humans agree to be important.
Also available as an Admiral™ Shares mutual fund.
sycamore
Posts: 6309
Joined: Tue May 08, 2018 12:06 pm

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by sycamore »

Novice2020 wrote: Sun Dec 05, 2021 2:45 pm Silly question, but when they say VTSAX and VTI have $1.4 trillion...Does that figure also include the numerous Vanguard Target Date funds, many of which are in 401K plans, which hold an equivalent of VTSAX, but often without the VTSAX Label? For example, mine is:

Vanguard Total Stock Mkt Idx Instl Pls

But I think technically this is different than VTSAX, though on the back end it is probably identical? Just curious if the 1.4 trillion figure includes people like me who hold VTSAX equivalents in their 401K plan.
Vanguard has multiple "total stock market" funds. Some are available to retail investors, some are only available to institutions (like a 401k).
Some are structured as a Collective Investment Trust or Unit Investment Trust as opposed to a mutual fund or ETF.

VTSAX is just one share class out or six in one fund. Three of them are the better known Investor, Admiral, and ETF share classes, the other three are "institutional" (regular, Plus, and Select):
Image

Meanwhile, there's a completely separate fund with two share classes, both of them "institutional" (regular and Plus):
Image

To answer your question about the reported $1.4T figure...

The one fund (with its six share classes) shows $1.3T as of 11/30/2021. The other fund has only $0.035T.

There are two Vanguard "Total Market" Collective Trusts (https://institutional.vanguard.com/inve ... /fund/1885 and https://institutional.vanguard.com/inve ... /fund/0125) with $27.1B and $7.8B between them.

Add all that up and it's within a few 10's of billions to $1.4T. Peanuts.
mikejuss
Posts: 2749
Joined: Tue Jun 23, 2020 1:36 pm

"The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by mikejuss »

[Thread merged into here --admin LadyGeek]

Based on this WSJ piece, what are your thoughts on the merits and demerits of VTSAX?
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by nisiprius »

(Unneeded now that threads have been merged)
Last edited by nisiprius on Sun Dec 05, 2021 6:52 pm, edited 2 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
22twain
Posts: 4016
Joined: Thu May 10, 2012 5:42 pm

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by 22twain »

mikejuss wrote: Sun Dec 05, 2021 5:46 pm what are your thoughts on the merits and demerits of VTSAX?
What are your thoughts? :wink:
Meet my pet, Peeve, who loves to convert non-acronyms into acronyms: FED, ROTH, CASH, IVY, ...
VTI
Posts: 282
Joined: Sat Mar 13, 2021 11:56 pm

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by VTI »

This part implies that front-running is worse for VTSAX than it is for VFIAX (S&P 500):
Additions to the CRSP index—and thus, to the Vanguard fund—can rock parts of the market. When 164 stocks were added to the index in mid-September, their combined trading volume that week doubled from the average of the prior four weeks, according to FactSet. And their prices jumped 3.6 percentage points more than comparable microcap stocks in the same five-week period.

Elisabeth Kashner, director of global fund analytics at FactSet, says some “market impact and front running” are inevitable when there is such a sizable buyer.
Fascinating! Just yesterday, I opened a thread raising this possibility.
Also available as an Admiral™ Shares mutual fund.
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by nisiprius »

VTI wrote: Sun Dec 05, 2021 6:02 pm This part implies that front-running is worse for VTSAX than it is for VFIAX (S&P 500):
Additions to the CRSP index—and thus, to the Vanguard fund—can rock parts of the market. When 164 stocks were added to the index in mid-September, their combined trading volume that week doubled from the average of the prior four weeks, according to FactSet. And their prices jumped 3.6 percentage points more than comparable microcap stocks in the same five-week period.

Elisabeth Kashner, director of global fund analytics at FactSet, says some “market impact and front running” are inevitable when there is such a sizable buyer.
Fascinating! Just yesterday, I opened a thread raising this possibility.
But do the math.

I don't know the exact 164 stocks that were added, but let's assume they must have been among the smallest stocks.

As of 10/31/2021, the three hundred smallest stocks in VTI constituted 0.00545% of the portfolio.

(advisors.vanguard.com >> search for and select VTI >> portfolio >> holdings >> export for holdings, and do a bit of spreadsheet work)

If they were somehow driven up in price 3.6% more than they should have been, then the effect was to cost VTI an excess of 3.6% of 0.00545% = 0.0002% of the total value of the portfolio.

If you bought $100,000 worth of VTI the day after they were added, then due to whatever happened--including possible front-running (unlikely due to the construction of modern indexes)--you overpaid by twenty cents.

When you are working down at the lower margin of adding and dropping stocks from a total market index, whatever horrors maybe happening, they are affecting such a microscopic percentage of the total portfolio value that I can take it philosophically. I lose no sleep over the possibility that, by shrewd human trading against a robotic index fund, someone has gotten the better of me to the tune of twenty cents.
Last edited by nisiprius on Sun Dec 05, 2021 6:54 pm, edited 6 times in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
LadyGeek
Site Admin
Posts: 95466
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by LadyGeek »

I merged mikejuss' thread into the ongoing discussion.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
mikejuss
Posts: 2749
Joined: Tue Jun 23, 2020 1:36 pm

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by mikejuss »

mikejuss wrote: Sun Dec 05, 2021 5:46 pm [Thread merged into here --admin LadyGeek]

Based on this WSJ piece, what are your thoughts on the merits and demerits of VTSAX?
Apologies--thank you.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
gtrplayer
Posts: 843
Joined: Sat Dec 08, 2018 3:13 pm

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by gtrplayer »

nisiprius wrote: Sun Dec 05, 2021 6:27 pm
VTI wrote: Sun Dec 05, 2021 6:02 pm This part implies that front-running is worse for VTSAX than it is for VFIAX (S&P 500):
Additions to the CRSP index—and thus, to the Vanguard fund—can rock parts of the market. When 164 stocks were added to the index in mid-September, their combined trading volume that week doubled from the average of the prior four weeks, according to FactSet. And their prices jumped 3.6 percentage points more than comparable microcap stocks in the same five-week period.

Elisabeth Kashner, director of global fund analytics at FactSet, says some “market impact and front running” are inevitable when there is such a sizable buyer.
Fascinating! Just yesterday, I opened a thread raising this possibility.
But do the math.

I don't know the exact 164 stocks that were added, but let's assume they must have been among the smallest stocks.

As of 10/31/2021, the three hundred smallest stocks in VTI constituted 0.00545% of the portfolio.

(advisors.vanguard.com >> search for and select VTI >> portfolio >> holdings >> export for holdings, and do a bit of spreadsheet work)

If they were somehow driven up in price 3.6% more than they should have been, then the effect was to cost VTI an excess of 3.6% of 0.00545% = 0.0002% of the total value of the portfolio.

If you bought $100,000 worth of VTI the day after they were added, then due to whatever happened--including possible front-running (unlikely due to the construction of modern indexes)--you overpaid by twenty cents.

When you are working down at the lower margin of adding and dropping stocks from a total market index, whatever horrors maybe happening, they are affecting such a microscopic percentage of the total portfolio value that I can take it philosophically. I lose no sleep over the possibility that, by shrewd human trading against a robotic index fund, someone has gotten the better of me to the tune of twenty cents.
It has negligible impact on VTI investors but has a significant impact on the individual share owners of those c companies.
etfan
Posts: 522
Joined: Sun May 16, 2021 4:22 pm

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by etfan »

nisiprius wrote: Sun Dec 05, 2021 6:27 pm (advisors.vanguard.com >> search for and select VTI >> portfolio >> holdings >> export for holdings, and do a bit of spreadsheet work)
I did not know they had this on their site. Thanks!

One issue with VTI is, given that it seems many people agree there is no difference from S&P500 in terms of results, then why bother with a fund that wastes time and energy managing thousands of non-contributing stocks?
User avatar
nisiprius
Advisory Board
Posts: 52105
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by nisiprius »

etfan wrote: Sun Dec 05, 2021 8:07 pm
nisiprius wrote: Sun Dec 05, 2021 6:27 pm (advisors.vanguard.com >> search for and select VTI >> portfolio >> holdings >> export for holdings, and do a bit of spreadsheet work)
I did not know they had this on their site. Thanks!

One issue with VTI is, given that it seems many people agree there is no difference from S&P500 in terms of results, then why bother with a fund that wastes time and energy managing thousands of non-contributing stocks?
Well, that waste of time and energy can't be all that bad, since the expense ratio isn't any higher.

This is an unanswerable matter of opinion. There is a difference from the S&P 500 and I charted it here upthread. The S&P 500 and VTI have leapfrogged each other, by tiny amounts.

My original motive for buying the S&P 500 was not "to take advantage of the stock-picking wisdom of the S&P 500 committee." It was "not to pick stocks at all, but just buy the whole market." The S&P 500 was traditionally regarded as a measure of the whole market. Eventually I became aware of something called the "Wilshire 5000" and started getting material from Vanguard suggesting that I might want to add the Extended Market Index Fund with 0.50% ER to the 500 Index Fund with 0.25% ER, if I remember correctly. It sounded complicated and it cost more so I didn't do it. Eventually they introduced the all-in-one Total Stock Market Index Fund, and eventually the expense ratio fell to being the same as the 500 Index fund. I switched. Not out of any profound conviction that it made much difference. Not out of any lust for those sexy small-cap stocks. Just simply because Total Stock was a better fit to my original idea.

When people began fussing over Tesla being added to the S&P 500 in late 2020, I could shrug and say "I don't care, I've had it since 2010."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
Eric
Posts: 862
Joined: Fri Feb 23, 2007 4:44 pm
Location: Texas

Re: Is VTI (based on CRSP U.S. Total Market Index) the best way to capture U.S. equity returns?

Post by Eric »

burritoLover wrote: Sun Dec 05, 2021 10:33 am I'm curious if there is any "500" indexes that are simply the 500 largest companies by market cap evaluated say, once a year. It isn't like we are talking about illiquid small stocks here. It seems you could have a simple rules-based strategy to handle this. Maybe that is what the CSRP is.
The Fidelity Zero Large Cap Index Fund tracks "the Fidelity U.S. Large Cap Index, which is a float-adjusted market capitalization-weighted index designed to reflect the performance of U.S. large capitalization stocks. Large capitalization stocks are considered to be stocks of the largest 500 U.S. companies based on float-adjusted market capitalization."
mikejuss
Posts: 2749
Joined: Tue Jun 23, 2020 1:36 pm

Re: "The Mutual Fund That Ate Wall Street—Based on an Index Few People Know About": Debating VTSAX

Post by mikejuss »

22twain wrote: Sun Dec 05, 2021 5:55 pm
mikejuss wrote: Sun Dec 05, 2021 5:46 pm what are your thoughts on the merits and demerits of VTSAX?
What are your thoughts? :wink:
Well, in a nutshell, I like it, but I'm eager to hear the thoughts of those with more analytical minds than my own. Skimming this thread, I think my takeaway is that VTSAX is just fine. To me, it's quite interesting to have learned just how it was constructed.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
Post Reply