Author Topic: VTSAX vs everything else  (Read 3010 times)

joenorm

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VTSAX vs everything else
« on: December 25, 2018, 03:46:21 PM »
Hello,

I am relatively new here but have read enough to see how popular a fund VTSAX is for people here. I look forward to purchasing some when the market opens back up.

When I set up my IRA a few years ago the guy at vanguard recommended VASGX. Not knowing any better, that is where my money currently sits.

My question is if there is a significant difference between the two? Why is VTSAX so highly regarded here?

thanks and happy holidays!

RWD

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Re: VTSAX vs everything else
« Reply #1 on: December 25, 2018, 03:55:34 PM »
Have you read the stock series?
https://jlcollinsnh.com/stock-series/

maizefolk

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Re: VTSAX vs everything else
« Reply #2 on: December 25, 2018, 05:20:17 PM »
VASGX is sort of a meta-index fund that invests in the domestic stock market, the international stock market, the domestic bond market and the international bond market. About half of the total assets of VASGX are invested in VTSAX (well the investor shares equivalent).

The overall fund has a 80/20 stock bond ratio (owning just VTSAX would be a 100/0 stock bond ratio, or you could put 80% of your assets in VTSAX and 20% in some bond fund yourself).

Like most other things in life, you can go premade or DIY. In investment planning, buying your own set of index funds gives you scope to get what feels exactly right for you (for example deciding the exact ratios of international:domestic and stocks:bonds that you want, or how often you want to rebalance). Getting something pre-made gives much less room to mess things up, and is great for just setting and forgetting for years and years at a time.

VASGX isn't the exact investment mix I would chose, but it is still a perfectly solid one.

Andy R

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Re: VTSAX vs everything else
« Reply #3 on: December 25, 2018, 07:36:44 PM »
VASGX is excellent. If you don't want to spend time learning or have not yet, that is pretty much ideal for someone younger and far from retirement.

VASGX is 80/20 equity/bonds and VTSAX is equity only. Bonds serve a couple of purposes, each of which are less useful when you are far from retirement and have little in the way of capital, hence the avocation of VTSAX, especially from a younger crowd. As you get older and have more capital to protect and move closer to retirement, bonds have an important place.

If you want a more detailed answer I think you're going to spend the time reading and learning it. The answer is too long for a single post. Here is some reading material I found to be good.

The Little Book of Common Sense Investing by Bogle
https://investingroadmap.wordpress.com/
https://jlcollinsnh.com/stock-series/
https://www.bogleheads.org/forum/index.php


joenorm

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Re: VTSAX vs everything else
« Reply #4 on: December 26, 2018, 08:55:27 AM »
thank you all for the explanation and the links to further reading.

So as a "younger" person it seems being 100% in stocks would be preferred? So VTSAX would be appropriate.

I know the answers are personal and pretty complex.

thanks

MustacheAndaHalf

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Re: VTSAX vs everything else
« Reply #5 on: December 26, 2018, 09:01:37 AM »
You can look at the contents of Vanguard's target date funds.  When you're 30+ years from retirement, their target date funds hold just 10% bonds.

maizefolk

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Re: VTSAX vs everything else
« Reply #6 on: December 26, 2018, 09:13:54 AM »
As a young/younger person I would advise you against being heavily in bonds.

Whether that means 100/0 (VTSAX), 90/10 (mostly VSTAX plus a little in a bond fund), or 80/20 (could be VSTAX and a bond fund, or just leave everything in VASGX) is something folks here could argue back and forth about essentially indefinitely.

So the short answer is none of the allocations I listed above are going to be horribly wrong. Just avoid being too heavily in bonds, avoid leaving your money in cash, and avoid putting a significant chunk of your net worth into the stock of individual companies and it will be hard to mess up significantly.

Andy R

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Re: VTSAX vs everything else
« Reply #7 on: December 26, 2018, 10:35:16 AM »
Good answers in this thread. Really can't go wrong with 80-100% equities while young and without much money.

At some point you will have enough money to be very unhappy about the thought of losing up to half of if for possibly many years, and at that point you should consider bonds more seriously.
For me anything under 200k is not enough to worry much about an up to 50% drop so I'm ok with just an emergency fund and the rest in stocks. For others, this will be stressful and they will want some bonds before that point. For others still, they can handle 500k or more all in stocks (although I doubt there are many who actually will be ok with it, despite many thinking they will).

A simple rule to start with is, consider your total amount of money for investing. Then think how much in actual dollars you could tolerate it dropping to without freaking out and panicking. Double the drop and that is your equities. Repeat this every year to adjust you ratio to your new balance.
For example
- with 100k I'm ok with it dropping by half, so my AA would be 100/0
- with 200k I'm ok with it dropping to 120k, so my AA would be 80/20
- with 300k I'm ok with it dropping to 180k, so my AA would be 80/20
- with 500k I'm ok with it dropping to 320k, so my AA would be 72/28
etc

These are just my own numbers. You would need to do it for yourself for your current balance.
And you need to use your actual dollar amounts, because in a crash you will see those actual dollar amounts come off.

One thing I've realised is, despite all the people on this forum saying 100% stocks, don't just blindly follow the crowd. Don't to be afraid of having some bonds. 10% and even 20% does not reduce your returns much but lowers volatility a lot, and being able to sleep well during a market crash is the most important part of investing after diversification.