Author Topic: The difference in prices of stocks/Vanguard  (Read 954 times)

WootWoot

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The difference in prices of stocks/Vanguard
« on: December 10, 2017, 02:57:23 PM »
I just found out today that through my employer's 403(b), I can buy into an index fund at Vanguard. I have an 401(k) and a Roth there, and was thinking of VTSAX.

The rep from the 403(b) gave me a written proposal of reallocation of funds. One of the funds is VFIAX, which has a price of $245.75, versus VTSAX, which is $66.42.

I think I can get VTSAX through my 403(b). My question is, and I hope it's not a silly one: Is one of these better than the other, based upon the price? From what I can see, the performances are very similar.

I'm so new to this, I can use all the help I can get! :)  Thank you.

terran

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Re: The difference in prices of stocks/Vanguard
« Reply #1 on: December 10, 2017, 03:08:42 PM »
It's a little bit of a silly question, but I'm sure it's one that many of us have had :-)

In short, no the price of a mutual fund does not matter. It just means there are a different number of shares for a given amount of value in the mutual fund. In fact, vanguard has different share classes of the exact same index fund (that require different total investments, but are otherwise exactly the same) that can have different prices.

What matters is the index that the fund tracks. VFIAX is an S&P 500 index fund. VTSAX is a total market index which tracks both the S&P 500 plus a bunch of smaller companies. So VTSAX is "better" in the sense that it's more diversity (follows an index that tracks more companies), but if larger companies do better over a period of time, then the S&P 500 index will do better (and vice versa). Either would be a good option, and they do tend to be very similar (because large companies tend to have roughly the same performance of the overall economy).

maizeman

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Re: The difference in prices of stocks/Vanguard
« Reply #2 on: December 10, 2017, 03:08:57 PM »
Based on the price, no that doesn't tell us anything meaningful about either fund since the "units" are of arbitrary size. VTSAX is a "total" USA stock market fund and holds the shares of about 3,600 companies. VFIAX holds the shares of the 500 largest US companies, which are a subset of the companies in VTSAX.

Over the extremely long run, VTSAX might return a little more on average and VFIAX might be a little lower risk and lower volatility.

WootWoot

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Re: The difference in prices of stocks/Vanguard
« Reply #3 on: December 10, 2017, 03:29:29 PM »
Thank you very much!!
The rep may have recommended the one with lower volatility because I have been playing it safe with a target retirement fund for many years now. I've been scared of ANY risk.


WootWoot

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Re: The difference in prices of stocks/Vanguard
« Reply #4 on: December 10, 2017, 03:30:22 PM »
This stuff is more interesting than I ever thought it would be. And I'm pleased that I'm making a start in understanding it. Thanks again!

Acastus

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Re: The difference in prices of stocks/Vanguard
« Reply #5 on: December 11, 2017, 11:06:59 AM »
For future reference, Vanguard has up to 4 classes of the same fund:  investor (regular), admiral (more money), institutional (for 401k and the like), and ETF. I think of them as the same, because you can do an in kind swap if you meet the prerequisites of the new share class. They can all have different share prices, and that almost never matters.

WootWoot

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Re: The difference in prices of stocks/Vanguard
« Reply #6 on: December 11, 2017, 03:35:52 PM »
Thank you!