Author Topic: 500 etf vs total market  (Read 2386 times)

mpcharles

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500 etf vs total market
« on: May 31, 2017, 07:55:55 AM »
Would investing in a S&P 500 with stable large companies that usually pay dividends not be better than investing in the total market e.g VTS as a lot of companies listed are junk not paying anything. Aren't I lowering my returns by going after everything except the winners like the the S&P 500 ETF only?

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Scandium

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Re: 500 etf vs total market
« Reply #1 on: May 31, 2017, 08:06:33 AM »
Why are S&P 500 "the winners?"
Who cares that the large companies pay dividends?

Yes you'd do better if you only go after the winners, except you don't know who there winners are! Apple/MS/google were at one point not in the S&P, but Kodak and Circuit City were..

extremedefense

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Re: 500 etf vs total market
« Reply #2 on: May 31, 2017, 08:10:15 AM »
Would investing in a S&P 500 with stable large companies that usually pay dividends not be better than investing in the total market e.g VTS as a lot of companies listed are junk not paying anything. Aren't I lowering my returns by going after everything except the winners like the the S&P 500 ETF only?

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The 500 only has large cap stocks, where the total has medium and small cap stocks which although they don't pay as much dividends, they increase in value more than the 500. Tesla is a mid cap stock, so by getting the total you're getting a tiny part of all 3k+ stocks that are publicly traded.

With a total market fund, you're still getting around 80% of the S&P 500 stocks, so what I do, is do a 500 fund and a VXF fund, which is an "extended market" fund, which is basically.. Every stock that is not in the sp 500. You can do 50 50 or whatever you're comfortable with, and you don't need to feel trapped in a total market fund.

Just my $0.02

talltexan

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Re: 500 etf vs total market
« Reply #3 on: May 31, 2017, 09:30:53 AM »
I imagine TSLA is now in the SP500. They have a market cap greater than Ford, which--at $45 billion--is surely in the Fortune 500.

extremedefense

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Re: 500 etf vs total market
« Reply #4 on: May 31, 2017, 09:50:20 AM »
I imagine TSLA is now in the SP500. They have a market cap greater than Ford, which--at $45 billion--is surely in the Fortune 500.
Just checked and TSLA is still not in the S&P 500.

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MustacheAndaHalf

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Re: 500 etf vs total market
« Reply #5 on: May 31, 2017, 09:26:59 PM »
I see that as well: on the portfolio page of Vanguard Total Stock Market, "Tesla Inc" joins 9 other companies that fit between Yahoo! Inc and Haliburton Co.  But peek at the S&P 500 list, and only 2 companies are between them.  Up to Standard & Poor's, I suppose.

The Total Stock Market overlaps the S&P 500 about 72%.  Their performance tends to be similar in practice.  I favor having the small and mid cap stocks as well, not just the S&P 500, but indexing at low cost is more important than that distinction.

respond2u

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Re: 500 etf vs total market
« Reply #6 on: June 02, 2017, 06:23:26 PM »
I see that as well: on the portfolio page of Vanguard Total Stock Market, "Tesla Inc" joins 9 other companies that fit between Yahoo! Inc and Haliburton Co.  But peek at the S&P 500 list, and only 2 companies are between them.  Up to Standard & Poor's, I suppose.

The Total Stock Market overlaps the S&P 500 about 72%.  Their performance tends to be similar in practice.  I favor having the small and mid cap stocks as well, not just the S&P 500, but indexing at low cost is more important than that distinction.

To be in the S&P 500, you have to have 4 straight quarters of positive earnings. http://www.investopedia.com/articles/investing/090414/sp-500-index-you-need-know.asp

That leaves Tesla out, right?

COEE

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Re: 500 etf vs total market
« Reply #7 on: June 04, 2017, 03:01:22 AM »
Their performance tends to be similar in practice.  I favor having the small and mid cap stocks as well, not just the S&P 500, but indexing at low cost is more important than that distinction.

I agree.  I've also seen that the performance is similar.  For just about every 10 year period the total market does better though.  http://stockcharts.com/freecharts/perf.php?SVSPX,SWTSX  For this reason, I favor total market.  However, I've had the situation where the fees were higher for the total market or a total market option didn't exist - so I went with the S&P500 fund.  No worries.