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Learning, Sharing, and Teaching => Investor Alley => Topic started by: katsiki on November 05, 2018, 11:41:16 AM

Title: 401k options - advice please
Post by: katsiki on November 05, 2018, 11:41:16 AM
I have 3 options from Vanguard with a new 401k administrator.  Excluding the bond fund, they are:

 Vanguard 500 Index Fund Admiral Shares (VFIAX)

 Vanguard Mid-Cap Index Fund Admiral Shares (VIMAX)


Can some wise Mustachians suggest a good mix for me?  It doesn't appear that either of these are the same as the oft-mentioned VTSAX.  (I did find a lot of comparisons between VFIAX and VTSAX here and elsewhere).

Thanks!!
Title: Re: 401k options - advice please
Post by: swinginbeef on November 05, 2018, 11:46:13 AM
80% - 500 fund and 20% - MidCap fund will roughly match a Total Market fund.
Title: Re: 401k options - advice please
Post by: katsiki on November 05, 2018, 01:17:40 PM
Thanks for the reply, @swinginbeef !
Title: Re: 401k options - advice please
Post by: seattlecyclone on November 05, 2018, 04:49:14 PM
VTSAX is all the US stocks, weighted by market cap. VFIAX is only the 500 largest ones, but by value that's still around 80% of VTSAX. If you look at a comparison graph (https://www.google.com/search?q=MUTF:+VTSAX&stick=H4sIAAAAAAAAAONgecRozi3w8sc9YSm9SWtOXmPU4OIKzsgvd80rySypFJLiYoOyBKT4uHj00_UNK8uTCitM0s14AKG8yOg8AAAA&tbm=fin#scso=_F9XgW93FJqHq9APqg7fYDA2:0&smids=/g/1ywbr0sjh&wptab=COMPARE) of VTSAX vs. VFIAX you'll see that the two funds move mostly in lockstep. The mid-cap fund is medium-sized companies, which make up about 10% of VTSAX. To do a good replica of VTSAX you'd put 80% in the 500 fund, 10% in the mid-cap fund, and 10% in a small-cap fund. Buying 80/20 large-cap/mid-cap might be a bit closer to VTSAX than just buying 100% large-cap, but still not quite there because you're skipping the small companies and buying the medium-sized ones with double weighting.

You could find a small-cap fund elsewhere (in your IRA, perhaps) to make up for the fact that your 401(k) doesn't have one from Vanguard.

Alternatively there's the Vanguard Extended Market Index (https://investor.vanguard.com/mutual-funds/profile/vexax) that is designed to be VTSAX minus the top 500 companies. If, for example, you have an IRA that's at least a quarter of the balance of your 401(k) you could do 100% VFIAX in the 401(k) and then buy the Extended Market Index in an amount roughly a quarter of the 401(k) balance to get a more exact replica of VTSAX.

Or you could realize that VTSAX is pretty close in historical performance to VFIAX and just buy only that for your stock allocation.