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'''{{PAGENAME}}''' shows how funds can be combined in order to mimic the composition of the U.S. stock market.
 
Investors wishing to invest in Vanguard Total Stock Market Index Fund often face a situation where they have to approximate it with the funds available in their employer sponsored plans and quite possibly some other funds available in other accounts such as a [[Roth IRA]].
Investors wishing to invest in Vanguard Total Stock Market Index Fund often face a situation where they have to approximate it with the funds available in their employer sponsored plans and quite possibly some other funds available in other accounts such as a [[Roth IRA]].


This page shows a few examples of approximating Vanguard Total Stock Market Index Fund with funds covering specific parts of the market.
This page shows a few examples of approximating Vanguard Total Stock Market Index Fund with funds covering specific parts of the market.
==Stock market classifications==
===Size===
Stocks may classified by the size of the corporation.  This is most commonly done looking at the market capitalization.  [[Market capitalization]] is simply a measurement found by taking a stock's current share price and multiplying it by the number of stock shares outstanding.
Exact market cap ranges will vary among different financial and rating institutions, but there are three different terms commonly used to describe stocks by their general size. 
*'''Large capitalization stocks''':<br>Large cap stocks have a market cap over $10 billion.
*'''Mid capitalization stocks''':<br>Mid cap stocks have a market cap between $2 billion and $10 billion.
*'''Small capitalization stocks''':<br>Small cap stocks have a market cap between $300 million and $2 billion.
===Style===
Stocks may also be classified by "style," either value, blend, or growth.  Growth stocks are companies that are growing their profits at a very fast rate and are expected to continue to grow at an increasing rate.  Value stocks are stocks that tend to trade at deep discount relative to their intrinsic value (as defined by profits, book value etc.).  Common investor perceptions tend to perceive growth stocks as "high flying companies" and value stocks as "distressed companies."
Both growth and value stocks have taken turns leading and lagging one another during different markets and economic conditions. <ref group="note">On the [[Callan periodic table of investment returns]], that visualizes the performance of the different asset classes, one can see the alternating performance of the growth and value stocks.</ref>
{| {{table}}
|+ Table 1. '''Total  Market Index  Style Box (%)'''
|
| align="center" style="background:#f0f0f0;"|'''Value'''
| align="center" style="background:#f0f0f0;"|'''Blend'''
| align="center" style="background:#f0f0f0;"|'''Growth'''
|-
| align="right" style="background:#f0f0f0;" | '''Large Cap'''||align="center" | LV ||align="center" |LB ||align="center" | LG
|-
| align="right" style="background:#f0f0f0;" |'''Mid Cap'''||align="center" |MV ||align="center" |MB ||align="center" | MG
|-
| align="right" style="background:#f0f0f0;" |'''Small Cap'''||align="center" |SV ||align="center" |SB ||align="center" | SG
|}


==Examples==
==Examples==
These examples use the nine-box stock style box to show weightings that match the composition of the total US stock market.


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!Morningstar<br>Style Box
!Morningstar<br>Style Box
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|100% [https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT Vanguard Total Stock Market Index Fund (VTSMX) (0.15%)]<ref>[http://portfolio.morningstar.com/NewPort/Free/InstantXRayDEntry.aspx Morningstar Instant X-Ray] of VTSMX updated 11 January 2013.</ref>
|100% [https://investor.vanguard.com/mutual-funds/profile/VTSAX Vanguard Total Stock Market Index Fund (VTSAX)]
Updated 22 May 2020
|align="center"|
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{{MStarStylebox|24|24|24|6|6|7|3|3|3}}
{{MStarStylebox|25 | 25 | 26 | 6 | 6 | 6 | 2 | 2 | 2}}
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|100% [https://www.ishares.com/us/products/239724/ishares-core-sp-total-us-stock-market-etf iShares Core S&P Total U.S. Stock Market ETF (ITOT)]
Updated 17 Jan 2020
|align="center"|
{{MStarStylebox|24 | 29 | 25 | 5 | 6 | 6 | 2 | 2 | 2}}
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|100% [https://www.csimfunds.com/public/csim/home/products/exchange_traded_funds/summary.html?symbol=SCHB Schwab U.S. Broad Market ETF (SCHB)]
Updated 17 Jan 2020
|align="center"|
{{MStarStylebox|24 | 29 | 25 | 5 | 6 | 6 | 2 | 2 | 2}}
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|84% [https://investor.vanguard.com/mutual-funds/profile/VFIAX Vanguard 500 Index Fund (VFIAX)] <br>16% [https://investor.vanguard.com/mutual-funds/profile/overview/vexax Vanguard Extended Market Index Fund (VEXAX)]
Updated 17 Jan 2020
|align="center"|
{{MStarStylebox| 24 | 29 | 24 | 5 | 6 | 6 | 2 | 2 | 2}}
|-
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|80% [https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT Vanguard 500 Index Fund (VFINX) (0.15%)] <br>20% [https://personal.vanguard.com/us/funds/snapshot?FundId=0098&FundIntExt=INT Vanguard Extended Market Index Fund (VEXMX) (0.24%)]<br><br>''Note: This 80/20 ratio is also shown on the Vanguard [https://personal.vanguard.com/us/funds/tools/benchmarkstatistics Benchmark Statistics] page.''
|81% [https://investor.vanguard.com/mutual-funds/profile/VFIAX Vanguard 500 Index Fund (VFIAX)]<br>4% [https://investor.vanguard.com/mutual-funds/profile/VIMAX Vanguard Mid-Cap Index Fund (VIMAX)]<br>15% [https://investor.vanguard.com/mutual-funds/profile/VSMAX Vanguard Small-Cap Index Fund (VSMAX)]
Updated 27 Dec 2018
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{{MStarStylebox|24|25|23|6|7|7|3|3|3}}
{{MStarStylebox| 24 | 24 | 27 | 6 | 7 | 6 | 3 | 2 | 2}}
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|81% [https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT Vanguard 500 Index Fund (VFINX) (0.15%)]<br>6% [https://personal.vanguard.com/us/funds/snapshot?FundId=0859&FundIntExt=INT Vanguard Mid-Cap Index Fund (VIMSX) (0.21%)]<br>13% [https://personal.vanguard.com/us/funds/snapshot?FundId=0048&FundIntExt=INT Vanguard Small-Cap Index Fund (NAESX) (0.22%)]
|82% [https://investor.vanguard.com/mutual-funds/profile/VFIAX Vanguard 500 Index Fund (VFIAX)]<br>18% [https://investor.vanguard.com/mutual-funds/profile/VSMAX Vanguard Small-Cap Index Fund (VSMAX)]
Updated 27 Dec 2018
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{{MStarStylebox|24|25|22|6|7|6|3|3|3}}
{{MStarStylebox| 24 | 24 | 27 | 6 | 7 | 6 | 2 | 2 | 2}}
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|83% [https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT Vanguard 500 Index Fund (VFINX) (0.15%)]<br>17% [https://personal.vanguard.com/us/funds/snapshot?FundId=0048&FundIntExt=INT Vanguard Small-Cap Index Fund (NAESX) (0.22%)]
|83% [https://investor.vanguard.com/mutual-funds/profile/VFIAX Vanguard 500 Index Fund (VFIAX)]<br>17% [https://www.ishares.com/us/products/239710/ishares-russell-2000-etf iShares Russell 2000 Index (IWM)]
Updated 27 Dec 2018
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{{MStarStylebox|25|26|22|5|6|5|4|4|4}}
{{MStarStylebox| 24 | 24 | 28 | 6 | 6 | 6 | 2 | 2 | 2}}
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|86% [https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT Vanguard 500 Index Fund (VFINX) (0.15%)]<br>14% [http://www.ishares.com/product_info/fund/overview/IWM.htm iShares Russell 2000 Index (IWM) (0.20%)]
|83% [https://investor.vanguard.com/mutual-funds/profile/VFIAX Vanguard 500 Index Fund (VFIAX)]<br>11% [https://www.ishares.com/us/products/239763/ishares-core-sp-midcap-etf iShares S&P MidCap 400 Index (IJH)]<br>6% [https://www.ishares.com/us/products/239774/ishares-core-sp-smallcap-etf iShares S&P SmallCap 600 Index (IJR)]
Updated 27 Dec 2018
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{{MStarStylebox|26|27|23|4|4|3|4|4|5}}
{{MStarStylebox| 24 | 24 | 27 | 6 | 6 | 5 | 3 | 3 | 2}}
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|82% [https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT Vanguard 500 Index Fund (VFINX) (0.15%)]<br>11% [http://www.ishares.com/product_info/fund/overview/IJH.htm iShares S&P MidCap 400 Index (IJH) (0.20%)]<br>7% [http://www.ishares.com/product_info/fund/overview/IJR.htm iShares S&P SmallCap 600 Index (IJR) (0.20%)]<ref>Last calculated on 03 January 2013.</ref>
|85% [https://investor.vanguard.com/mutual-funds/profile/VFIAX Vanguard 500 Index Fund (VFIAX)]<br>15% [https://personal.vanguard.com/us/funds/snapshot?FundId=0116&FundIntExt=INT Vanguard Tax-Managed Small-Cap Fund Inv (VTMSX)]
Updated 27 Dec 2018
|align="center"|
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{{MStarStylebox|24|24|24|6|7|7|3|3|3}}
{{MStarStylebox| 25 | 25 | 28 | 5 | 6 | 5 | 2 | 2 | 2}}
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|85% [https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT Vanguard 500 Index Fund (VFINX) (0.15%)]<br>15% [https://personal.vanguard.com/us/funds/snapshot?FundId=0116&FundIntExt=INT Vanguard Tax-Managed Small-Cap Fund Inv (VTMSX) (0.13%)]
|87% [https://investor.vanguard.com/mutual-funds/profile/VLCAX Vanguard Large Cap Index Fund (VLACX)]<br>13% [https://investor.vanguard.com/mutual-funds/profile/VSMAX Vanguard Small-Cap Index Fund (VSMAX)]
Updated 27 Dec 2018
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{{MStarStylebox|25|26|23|5|4|4|3|5|4}}
{{MStarStylebox| 25 | 24 | 28 | 6 | 6 | 6 | 2 | 2 | 2}}
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|88% [https://personal.vanguard.com/us/funds/snapshot?FundId=0307&FundIntExt=INT Vanguard Large Cap Index Fund (VLACX) (0.20%)]<br>12% [https://personal.vanguard.com/us/funds/snapshot?FundId=0048&FundIntExt=INT Vanguard Small-Cap Index Fund (NAESX) (0.22%)]
|83% [https://fundresearch.fidelity.com/mutual-funds/analysis/315911750 Fidelity 500 Index Fund (FXAIX)]<br>10% [https://fundresearch.fidelity.com/mutual-funds/summary/316146265 Fidelity Mid Cap Index Fund (FSMDX)]<br>7% [https://fundresearch.fidelity.com/mutual-funds/summary/316146182 Fidelity Small Cap Index Fund (FSSNX)]
Updated 22 May 2020
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|92% [http://us.ishares.com/product_info/fund/overview/IWB.htm iShares Russell 1000 ETF (IWB) (0.15%)]<br>8% [http://us.ishares.com/product_info/fund/overview/IWM.htm iShares Russell 2000 ETF (IWM) (0.23%)]<ref>The ratio for the Russell 1000 and 2000 funds was calculated 03 Jan 2013. See [http://www.bogleheads.org/forum/viewtopic.php?f=1&t=107346#p1571134 Boglehead Forum Thread] for more on combining these two funds to approximate total stock market.</ref>
|92% [https://www.ishares.com/us/products/239707/ishares-russell-1000-etf iShares Russell 1000 ETF (IWB)]<br>8% [https://www.ishares.com/us/products/239710/ishares-russell-2000-etf iShares Russell 2000 ETF (IWM)]<ref>See this {{Forum post|p=1571134|title=Re: Follow up questions - total stock market approximation|author=hoppy08520|date=Jan 03, 2013}} for more on combining these two funds to approximate total stock market.</ref>
Updated 27 Dec 2018
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{{MStarStylebox|24|24|24|6|6|7|3|3|3}}
{{MStarStylebox| 24 | 24 | 28 | 5 | 6 | 6 | 2 | 2 | 2}}
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|82% John Hancock 500 Index (JEINX)<br>11% John Hancock Mid Cap Index (JECIX)<br>7% John Hancock Small Cap Index (JESIX)<ref>Calculated in Morningstar X-Ray on Feb. 27, 2013. This combination is likely only of interest to investors with a 401(k) plan held at [[John Hancock Funds]].</ref>
|82% John Hancock 500 Index (JEINX)<br>11% John Hancock Mid Cap Index (JECIX)<br>7% John Hancock Small Cap Index (JESIX)<ref>Calculated in Morningstar X-Ray on Feb. 27, 2013. This combination is likely only of interest to investors with a 401(k) plan held at [[John Hancock Funds]]. As of November 1, 2015, these ticker symbols are no longer available in Morningstar Instant X-Ray.</ref>
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* These percentages were computed on Aug 16, 2008, except where otherwise noted.
* These percentages were computed on Nov 1, 2015, except where otherwise noted.
* The style box numbers were computed by [http://portfolio.morningstar.com/NewPort/Free/InstantXRayDEntry.aspx Morningstar Instant XRay].
* The style box numbers were computed by [https://www.morningstar.com/instant-x-ray Morningstar Instant XRay] by entering each fund ticker as a holding, and entering the dollar value based on the percentage; for example, for VFIAX at 81% and VEXAX at 19%, enter $81 and $19 respectively and observe the computed Morningstar Style Box on the Instant X-Ray tab. Enter different dollar amounts (always adding up to $100) in a trial and error fashion until you replicate the same computation as Total Stock Market, or as close as you can get. A free (or paid) subscription to Morningstar is required to access Instant Xray.
* Computation was done by the [http://en.wikipedia.org/wiki/Least_squares method of least squares].
* Computation was done by the [http://en.wikipedia.org/wiki/Least_squares method of least squares]
* Investors contemplating on using an S&P MidCap 400 fund, for example, may consider the example above that uses IJH.  However, there may be slight implementation differences between the S&P MidCap 400 fund you have access to and IJH.
* Investors contemplating on using an S&P MidCap 400 fund, for example, may consider the example above that uses IJH.  However, there may be slight implementation differences between the S&P MidCap 400 fund you have access to and IJH.
* Two funds may appear to track the same portion of the market (say, mid-cap), but their holdings may differ depending on the indexes they track.
* Two funds may appear to track the same portion of the market (say, mid-cap), but their holdings may differ depending on the indexes they track.
==Notes==
<references group="note"/>
==See also==
*[[Thrift_Savings_Plan#Replicating_total_stock_market|Replicating total stock market with the Thrift Savings Plan]]
*[[Approximating total international stock market]]


==References==
==References==
<references/>
{{Reflist|30em}}
 
{{US stocks}}


{{US Stocks}}
{{Footer}}
[[Category:Asset allocation]]
[[Category:Asset allocation]]
[[Category:US stocks]]
[[Category:US stocks]]
[[Category:Vanguard]]
[[Category:Vanguard]]

Revision as of 09:27, 7 February 2021

Approximating total stock market shows how funds can be combined in order to mimic the composition of the U.S. stock market.

Investors wishing to invest in Vanguard Total Stock Market Index Fund often face a situation where they have to approximate it with the funds available in their employer sponsored plans and quite possibly some other funds available in other accounts such as a Roth IRA.

This page shows a few examples of approximating Vanguard Total Stock Market Index Fund with funds covering specific parts of the market.

Stock market classifications

Size

Stocks may classified by the size of the corporation. This is most commonly done looking at the market capitalization. Market capitalization is simply a measurement found by taking a stock's current share price and multiplying it by the number of stock shares outstanding.

Exact market cap ranges will vary among different financial and rating institutions, but there are three different terms commonly used to describe stocks by their general size.

  • Large capitalization stocks:
    Large cap stocks have a market cap over $10 billion.
  • Mid capitalization stocks:
    Mid cap stocks have a market cap between $2 billion and $10 billion.
  • Small capitalization stocks:
    Small cap stocks have a market cap between $300 million and $2 billion.

Style

Stocks may also be classified by "style," either value, blend, or growth. Growth stocks are companies that are growing their profits at a very fast rate and are expected to continue to grow at an increasing rate. Value stocks are stocks that tend to trade at deep discount relative to their intrinsic value (as defined by profits, book value etc.). Common investor perceptions tend to perceive growth stocks as "high flying companies" and value stocks as "distressed companies."

Both growth and value stocks have taken turns leading and lagging one another during different markets and economic conditions. [note 1]

Table 1. Total Market Index Style Box (%)
Value Blend Growth
Large Cap LV LB LG
Mid Cap MV MB MG
Small Cap SV SB SG


Examples

These examples use the nine-box stock style box to show weightings that match the composition of the total US stock market.

Funds Morningstar
Style Box
100% Vanguard Total Stock Market Index Fund (VTSAX)

Updated 22 May 2020

Value Blend Growth
25 25 26 Large
6 6 6 Mid
2 2 2 Small
100% iShares Core S&P Total U.S. Stock Market ETF (ITOT)

Updated 17 Jan 2020

Value Blend Growth
24 29 25 Large
5 6 6 Mid
2 2 2 Small
100% Schwab U.S. Broad Market ETF (SCHB)

Updated 17 Jan 2020

Value Blend Growth
24 29 25 Large
5 6 6 Mid
2 2 2 Small
84% Vanguard 500 Index Fund (VFIAX)
16% Vanguard Extended Market Index Fund (VEXAX)

Updated 17 Jan 2020

Value Blend Growth
24 29 24 Large
5 6 6 Mid
2 2 2 Small
81% Vanguard 500 Index Fund (VFIAX)
4% Vanguard Mid-Cap Index Fund (VIMAX)
15% Vanguard Small-Cap Index Fund (VSMAX)

Updated 27 Dec 2018

Value Blend Growth
24 24 27 Large
6 7 6 Mid
3 2 2 Small
82% Vanguard 500 Index Fund (VFIAX)
18% Vanguard Small-Cap Index Fund (VSMAX)

Updated 27 Dec 2018

Value Blend Growth
24 24 27 Large
6 7 6 Mid
2 2 2 Small
83% Vanguard 500 Index Fund (VFIAX)
17% iShares Russell 2000 Index (IWM)

Updated 27 Dec 2018

Value Blend Growth
24 24 28 Large
6 6 6 Mid
2 2 2 Small
83% Vanguard 500 Index Fund (VFIAX)
11% iShares S&P MidCap 400 Index (IJH)
6% iShares S&P SmallCap 600 Index (IJR)

Updated 27 Dec 2018

Value Blend Growth
24 24 27 Large
6 6 5 Mid
3 3 2 Small
85% Vanguard 500 Index Fund (VFIAX)
15% Vanguard Tax-Managed Small-Cap Fund Inv (VTMSX)

Updated 27 Dec 2018

Value Blend Growth
25 25 28 Large
5 6 5 Mid
2 2 2 Small
87% Vanguard Large Cap Index Fund (VLACX)
13% Vanguard Small-Cap Index Fund (VSMAX)

Updated 27 Dec 2018

Value Blend Growth
25 24 28 Large
6 6 6 Mid
2 2 2 Small
83% Fidelity 500 Index Fund (FXAIX)
10% Fidelity Mid Cap Index Fund (FSMDX)
7% Fidelity Small Cap Index Fund (FSSNX)

Updated 22 May 2020

Value Blend Growth
25 27 24 Large
6 6 5 Mid
2 2 2 Small
92% iShares Russell 1000 ETF (IWB)
8% iShares Russell 2000 ETF (IWM)[1]

Updated 27 Dec 2018

Value Blend Growth
24 24 28 Large
5 6 6 Mid
2 2 2 Small
82% John Hancock 500 Index (JEINX)
11% John Hancock Mid Cap Index (JECIX)
7% John Hancock Small Cap Index (JESIX)[2]
Value Blend Growth
24 24 24 Large
6 6 7 Mid
3 3 3 Small
  • These percentages were computed on Nov 1, 2015, except where otherwise noted.
  • The style box numbers were computed by Morningstar Instant XRay by entering each fund ticker as a holding, and entering the dollar value based on the percentage; for example, for VFIAX at 81% and VEXAX at 19%, enter $81 and $19 respectively and observe the computed Morningstar Style Box on the Instant X-Ray tab. Enter different dollar amounts (always adding up to $100) in a trial and error fashion until you replicate the same computation as Total Stock Market, or as close as you can get. A free (or paid) subscription to Morningstar is required to access Instant Xray.
  • Computation was done by the method of least squares
  • Investors contemplating on using an S&P MidCap 400 fund, for example, may consider the example above that uses IJH. However, there may be slight implementation differences between the S&P MidCap 400 fund you have access to and IJH.
  • Two funds may appear to track the same portion of the market (say, mid-cap), but their holdings may differ depending on the indexes they track.

Notes

  1. On the Callan periodic table of investment returns, that visualizes the performance of the different asset classes, one can see the alternating performance of the growth and value stocks.

See also

References

  1. See this Bogleheads forum post: "Re: Follow up questions - total stock market approximation", hoppy08520. Jan 03, 2013 for more on combining these two funds to approximate total stock market.
  2. Calculated in Morningstar X-Ray on Feb. 27, 2013. This combination is likely only of interest to investors with a 401(k) plan held at John Hancock Funds. As of November 1, 2015, these ticker symbols are no longer available in Morningstar Instant X-Ray.