Author Topic: Recreating a Total Stock Market Index Fund or Best Available Options  (Read 390 times)

Sanitary Engineer

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I am wondering if the funds I slected in my 457b are a rough approximation of a total stock marker index fund.  I checked the investment order and am now wondering if my overall plan is appropriate or if I should adjust to more closely match the order.

First of all I am in step 4/5 of the Investment Order (US):

4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - you earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           

I am using a 457b and not a 401k.  There is no employer match.  I am planning to put $6,000 into the 457b through pretax payroll deductions.  My thinking here is that the pretax deduction lowers the amount of money I pay to payroll taxes.  I intend to put 4-12k into our tIRAs in June 2021 mostly from 2020 tax return. 

I wonder now if I should keep this plan or focus on filling the tIRA contributions during the year, maxing them out and then using anything else I am able to save (from tax return) towards front loading 2021 457b contributions.  I don't get the impression that there is going to be a most optimized way to do this and think my current plan might be the simplest since the 457b dedcutions are automatic.

Then, assuming I continue my plan to contribute to both 457b and tIRA and neither to the max, the question is if the following funds and percentages are roughly approximate to VTSAX. I kind of want to drop the T. Rowe Price low cap fund because of it's higher ER.

VINIX 40% (large Cap Index) ER = 0.04%
VMCIX 20% (mid cap index) 0.04%
OTIIX  20% (T. Rowe Price small cap fund) 0.76%
VTMNX 20% (FTSE index replicant) 0.05%

I know international funds wouldn't be in VTSAX, but it seemed like a good option.

Thanks.

Tyler

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Re: Recreating a Total Stock Market Index Fund or Best Available Options
« Reply #1 on: June 26, 2020, 01:30:50 PM »
Then, assuming I continue my plan to contribute to both 457b and tIRA and neither to the max, the question is if the following funds and percentages are roughly approximate to VTSAX. I kind of want to drop the T. Rowe Price low cap fund because of it's higher ER.

VINIX 40% (large Cap Index) ER = 0.04%
VMCIX 20% (mid cap index) 0.04%
OTIIX  20% (T. Rowe Price small cap fund) 0.76%
VTMNX 20% (FTSE index replicant) 0.05%

VINIX follows the S&P500, which generally already includes both large caps and mid caps and accounts for about 85% of the total market. The other 15% would be small caps, but I agree with your assessment that it's not worth the ER in your case.  Personally I'd just use VINIX for the US portion of your portfolio and call it a day.

jinga nation

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« Last Edit: June 26, 2020, 02:00:17 PM by jinga nation »

Sanitary Engineer

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Re: Recreating a Total Stock Market Index Fund or Best Available Options
« Reply #3 on: June 26, 2020, 03:20:15 PM »
Awesome!
Thanks @jinga nation and @Tyler  I am into stocks so I'll go all VINIX. 

I do need to figure out what my tIRA/457b contribution spread should be but I imagine I'll figure it out next June when I make my next IRA contribution.

Buffaloski Boris

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Re: Recreating a Total Stock Market Index Fund or Best Available Options
« Reply #4 on: June 26, 2020, 04:47:44 PM »
If it were me I'd be increasing the share of international and ditching the T.Rowe small cap.  Vanguard has a couple of equivalents.  US stocks are expensive and for Americans don't help diversify US dollar risk.  What is up now is not necessarily what will be up later.  Diversification FTW.  YMMV.   

Indexer

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Re: Recreating a Total Stock Market Index Fund or Best Available Options
« Reply #5 on: June 28, 2020, 08:12:25 AM »
I agree with Buffaloski, add some international. The last time domestic outperformed international for a long time was in the 90s... and then US had it's lost decade and international outperformed.

60-70% VINIX and 30-40% VTMNX is the way I would go. VINIX is lacking small caps and VTMNX is all developed markets so it's missing emerging markets.

Looking at the entire portfolio, you normally want your most aggressive investments in your Roth. Adding VEXAX(extended market index) and VEMAX(emerging markets) to your Roth would compliment VINIX and VTMNX really well. The extended market index + SP500 = Total stock. Developed+emerging = Total international stock.

The proportions you want are about 80VINIX/20VEXAX and 80VTMNX/20VEMAX. I don't know if your 403b/Roth ratio makes this possible, but it's what I would aim for.