The Money Mustache Community

Learning, Sharing, and Teaching => Investor Alley => Topic started by: nick_mmm on August 13, 2018, 07:08:10 PM

Title: VEXAX?
Post by: nick_mmm on August 13, 2018, 07:08:10 PM
I am in the process of consolidating investment accounts to Vanguard, and recently did a free initial consultation/portfolio review with them.  I am pretty impressed with the recommendations (saved me a lot of time / math to get a base asset allocation across the accounts).

The only unexpected item was the recommendation to have 16% of assets in VEXAX (Vanguard Extended Market Index Fund) which they classify as U.S. mid/small-cap stock.

It seems to be similar to VTI /VTSAX except it totally excludes S&P 500 members.

Most of what I read is basically VTSAX, optionally some international and some bond as a base recommendation. From a philosophy/strategy perspective; what do people think of adding VEXAX?
Title: Re: VEXAX?
Post by: Abe on August 13, 2018, 08:04:55 PM
It's expense ratio is twice as high as VTSAX (total stock market) at 0.08% vs 0.04% (both are very low in absolute terms, of course). The benefit for this additional expense is unclear, as their performance over time has been roughly the same. If they're suggesting a SP500 index and this also, I'd just consolidate into the VTSAX instead.
Title: Re: VEXAX?
Post by: RWD on August 13, 2018, 08:05:53 PM
What makes up the rest of the suggested portfolio? I could see it making sense if you only had access to that and VFIAX but not VTSAX for some reason. Otherwise what's wrong with VTSAX?
Title: Re: VEXAX?
Post by: nick_mmm on August 13, 2018, 09:14:53 PM
Overall looked something like:
37% VTSAX
16% VEXAX
37% VTIAX
10% VBTLX

My guess would be this is to counter-act the weight in which a few huge companies (AAPL, GOOGL, etc) Have in VTI/VTSAX?
Title: Re: VEXAX?
Post by: Radagast on August 14, 2018, 09:31:26 AM
VEXAX is an S&P500 completion index, its purpose is to have all companies not in the S&P500 so that people with only S&P500 inside employer retirement accounts can mimic the total market. Otherwise it is not that special. Vanguard small-cap VSMAX is similar with 0.05% expense, or small-cap-value VSIAX. These would seem to me like better counter weights to the concentration of companies VTSAX, but it may not matter much.

There's nothing wrong with the concept, many people employ it. Sometimes (like so far this year) circumstances favor smaller companies, and sometimes "value" companies. For example the Bill Bernstein "no-brainer" portfolio is 25% to each of VTSAX/similar, VTIAX/similar, VSIAX/similar, VBTLX/similar and it seems like a sound concept to me.