Author Topic: "Synthetic" Total Market Position  (Read 1383 times)

AccidentalMiser

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"Synthetic" Total Market Position
« on: July 31, 2017, 08:43:29 AM »
My 401k is somewhat limited in fund availablity in that there is no "Total Market" fund available.  What I have available is an SP500 Fund and a Russell 2500 fund.  I wish to use these two funds to create a "synthetic" total market fund.

My plan is to weight them according to total market capitalization, which I have calculated at 21.8 trillion for SP and 11.3 for R2500.  This basically gives me a 2:1 ratio to build my total market position.

Thoughts?  Does my methodology seem sound to you?  As a side note, the fees for these funds are low (.035%) so I'm good with using what's available for this purpose.

Thank you!

Financial.Velociraptor

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Re: "Synthetic" Total Market Position
« Reply #1 on: July 31, 2017, 12:46:15 PM »
Since the russel is already market cap weighted, you don't need to mix in an S&P fund to get balanced coverage of the entire US.  You do need an international component to get an analog of total market though.

JustGettingStarted1980

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Re: "Synthetic" Total Market Position
« Reply #2 on: July 31, 2017, 12:56:43 PM »
You are thinking too hard... someone else already thought this up for you.

https://www.bogleheads.org/wiki/Approximating_total_stock_market

runewell

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Re: "Synthetic" Total Market Position
« Reply #3 on: July 31, 2017, 01:38:58 PM »
Since the russel is already market cap weighted, you don't need to mix in an S&P fund to get balanced coverage of the entire US.  You do need an international component to get an analog of total market though.
But they are collections of different stocks, so neither fund is the "entire US", merely a subset.  Might as well have some of both.

AccidentalMiser

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Re: "Synthetic" Total Market Position
« Reply #4 on: July 31, 2017, 03:36:48 PM »
You are thinking too hard... someone else already thought this up for you.

https://www.bogleheads.org/wiki/Approximating_total_stock_market

Thank you, this Wiki article led me to the Morningstar XRay tool and I was able to verify what the article said, which is about 4 to 1 instead of 2 to 1.

Thanks!!

AccidentalMiser

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Re: "Synthetic" Total Market Position
« Reply #5 on: July 31, 2017, 03:56:41 PM »
Since the russel is already market cap weighted, you don't need to mix in an S&P fund to get balanced coverage of the entire US.  You do need an international component to get an analog of total market though.

Thanks, but the Russell 2500 is the next batch of 2500 stocks below the SP 500 component so I do need both.  I should have clarified that I am trying to approximate VTSAX, which is basically all US, publicly-traded stocks. 

I do have an international fund so I'm already covered there.




JustGettingStarted1980

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Re: "Synthetic" Total Market Position
« Reply #6 on: July 31, 2017, 05:14:18 PM »
No problem, good luck!