Author Topic: VTSMX returns higher than VTSAX and VTI?  (Read 6323 times)

Bearded Man

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VTSMX returns higher than VTSAX and VTI?
« on: August 09, 2015, 07:18:20 PM »
Looking at the interactive chart on yahoo, comparing all three symbols, VTSMX is up nearly 400% since inception, while VTSAX and VTI are up about 100% since inception.

Yes, the fees are .17% for VTSMX, and only .005% for VTSAX, but the returns for VTSMX are way higher. Would I be leaving money on the table investing in VTSAX instead of VTSMX?

VTSMX is what MMM recommended in his blog, so between that and the gains I'm leaning toward VTSMX. But I'm no expert in stocks, so I came to the experts to see what the deal is.

nonsequitur

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #1 on: August 09, 2015, 07:24:53 PM »
Not sure what chart you are looking at.  If it's really since inception, then the difference is because VTSMX has been around much longer.  So you're not comparing the same time frames.

VTSMX and VTSAX are the same thing, with the fees (and minimum investment) being the only difference.   

EarlyStart

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #2 on: August 09, 2015, 07:27:47 PM »
VTSMX is the same thing as VTSAX except the former is the "investor class", and the latter is the "admiral class".

If you have VTSMX and exceed 10k, it's automatically converted to VTSAX, I believe. VTI is the etf and has 1500 or so of the largest stocks vs over 3000 in the index funds, which include more small cap names.


You're overthinking it.

MDM

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #3 on: August 09, 2015, 07:47:34 PM »
Not sure what chart you are looking at.  If it's really since inception, then the difference is because VTSMX has been around much longer.  So you're not comparing the same time frames.

VTSMX and VTSAX are the same thing, with the fees (and minimum investment) being the only difference.
^Yes.

Morningstar's default view (see this link) can be more illuminating.

From the linked chart, $10,000 invested in VTSMX 10 years ago would be worth $21,467.28 now, while the same amount invested in VTSAX would be worth $21,699.23.  The difference is the slightly lower expense ratio in VTSAX.  Although, as EarlyStart noted, once you go above $10K there is no reason to stay with VTSMX instead of VTSAX.

Bearded Man

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #4 on: August 09, 2015, 09:24:38 PM »
Not sure what chart you are looking at.  If it's really since inception, then the difference is because VTSMX has been around much longer.  So you're not comparing the same time frames.

VTSMX and VTSAX are the same thing, with the fees (and minimum investment) being the only difference.
^Yes.

Morningstar's default view (see this link) can be more illuminating.

From the linked chart, $10,000 invested in VTSMX 10 years ago would be worth $21,467.28 now, while the same amount invested in VTSAX would be worth $21,699.23.  The difference is the slightly lower expense ratio in VTSAX.  Although, as EarlyStart noted, once you go above $10K there is no reason to stay with VTSMX instead of VTSAX.

That's great, but as I said in my OP, the numbers don't match when you look since inception, and VTSMX has only been around a few years longer than VTSAX or VTI. When you look at the charts on Yahoo and compare the three of them together, you will see that VTSMX has gained 413% since inception, while VTSAX and VTI have only gained around about 80 and 90% or so respectively. Looking at any specific 10 year period is cherry picking.

How can this be if they are all the same fund? The charts don't indicate that they are the same fund considering their performance is wildly different, especially in the case of VTSMX vs the other two.
« Last Edit: August 09, 2015, 09:28:15 PM by Bearded Man »

acorn

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #5 on: August 09, 2015, 09:44:33 PM »
Not sure what chart you are looking at.  If it's really since inception, then the difference is because VTSMX has been around much longer.  So you're not comparing the same time frames.

VTSMX and VTSAX are the same thing, with the fees (and minimum investment) being the only difference.
^Yes.

Morningstar's default view (see this link) can be more illuminating.

From the linked chart, $10,000 invested in VTSMX 10 years ago would be worth $21,467.28 now, while the same amount invested in VTSAX would be worth $21,699.23.  The difference is the slightly lower expense ratio in VTSAX.  Although, as EarlyStart noted, once you go above $10K there is no reason to stay with VTSMX instead of VTSAX.

That's great, but as I said in my OP, the numbers don't match when you look since inception, and VTSMX has only been around a few years longer than VTSAX or VTI. When you look at the charts on Yahoo and compare the three of them together, you will see that VTSMX has gained 413% since inception, while VTSAX and VTI have only gained around about 80 and 90% or so respectively. Looking at any specific 10 year period is cherry picking.

How can this be if they are all the same fund? The charts don't indicate that they are the same fund considering their performance is wildly different, especially in the case of VTSMX vs the other two.

VTSMX started in 04/27/1992 (expense ratio 0.17%), VTSAX started in 11/13/2000 (expense ratio 0.05%), and VTI started in 05/24/2001 (expense ratio 0.05%). The inception dates are different so naturally, the gains since inception are going to be super different. Compare the three of them within the same timeframe, and you'll find that the performances are the same (with minor differences because of expense ratios).

acorn

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #6 on: August 09, 2015, 09:49:27 PM »
That's great, but as I said in my OP, the numbers don't match when you look since inception, and VTSMX has only been around a few years longer than VTSAX or VTI.

VTSMX started in 04/27/1992 (expense ratio 0.17%), VTSAX started in 11/13/2000 (expense ratio 0.05%), and VTI started in 05/24/2001 (expense ratio 0.05%). The inception dates are different so naturally, the gains since inception are going to be super different. Compare the three of them within the same timeframe, and you'll find that the performances are the same (with minor differences because of expense ratios).

So in other words, if you look at VTSMX from 04/27/1992 to 11/13/2000, the gain is 194%. So those 8 additional years made a heck of a difference.

MDM

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #7 on: August 09, 2015, 10:06:39 PM »
That's great, but as I said in my OP, the numbers don't match when you look since inception
True, and for the reason nonsequitur already mentioned and acorn has reiterated.  We'll discuss the cherry metaphor later, but taking another from the fruit world: comparing returns from different starting points is apples vs. oranges.

Quote
and VTSMX has only been around a few years longer than VTSAX or VTI. When you look at the charts on Yahoo and compare the three of them together, you will see that VTSMX has gained 413% since inception, while VTSAX and VTI have only gained around about 80 and 90% or so respectively.  Looking at any specific 10 year period is cherry picking. 

How can this be if they are all the same fund? The charts don't indicate that they are the same fund considering their performance is wildly different, especially in the case of VTSMX vs the other two.
The 10-year comparison was done to ensure identical starting points for the two funds.  Yes, that can be cherry picking when used to show one fund is "better" than another, but it seemed that showing the two lines superimposed throughout the 10 year period was a reasonable way to show the performances are essentially identical.

The chart shows VTSMX starting with a first day close of $10.18 back in Apr. 1992, and VTSMX and VTSAX starting with identical share prices, $28.93, in Nov. 2000.  VTSAX is currently ~$0.02/share higher: practically identical, except for the slightly better VTSAX performance due to the lower fee.

Also note that VTSMX had risen 184.18% by the time VTSAX opened.  That comes from $28.93/$10.18 - 1 = 184.18%.

Since then, VTSMX has risen by $52.25/$28.93 - 1 = 80.61%.  VTSAX has risen by $52.27/$28.93 - 1 = 80.68%.

From its opening, VTSMX has risen by $52.25/$10.18 - 1 = 413.26%.



Does that make sense?

I'm a red panda

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #8 on: August 10, 2015, 07:09:43 AM »
The charts don't indicate that they are the same fund considering their performance is wildly different, especially in the case of VTSMX vs the other two.

I think people have explained well why their performance is different. But if you still don't believe they are the same fund, why not go to Vanguard's website and compare what their holdings are. They will be identical.

Dexterous

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #9 on: August 10, 2015, 07:47:06 AM »
As others mentioned, it's the same fund named "Total Stock Market Index" offered by Vanguard.

The options (or share classes) you can choose are:

Investor Shares, Symbol: VTSMX, Expense Ratio:  .17%, Minimum Investment:  $3k
Admiral Shares, Symbol:  VTSAX, Expense Ratio:  .05%, Minimum Investment:  $10k
Institutional Shares, Symbol:  VITSX, Expense Ratio:  .04%, Minimum Investment:  $5mil
Institutional Plus Shares, Symbol:  VSMPX, Expense Ratio:  .02%, Minimum Investment:  $100mil

Exchange Traded Fund (ETF), Symbol: VTI, Expense Ratio: .05%, Minimum Investment: Cost per share, you can buy a single share

Leanthree

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #10 on: August 10, 2015, 01:06:21 PM »
I'd also add:

Use Morningstar.com's charts for funds and not Yahoo. Yahoo tracks share price of ETFs and does not include dividend reinvestment.

Bearded Man

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #11 on: August 10, 2015, 04:44:33 PM »
I'd also add:

Use Morningstar.com's charts for funds and not Yahoo. Yahoo tracks share price of ETFs and does not include dividend reinvestment.

There we go. Gotta be careful about using yahoo from now on. Not as big of a difference now, in fact, VTSAX is ahead slightly, but so little that it's negligible, though between that and the lower expenses, THAT seems like the better option. That said, VTSAX has lower expenses than VTSMX, so why does MMM specifically recommend VTSMX alone on his blog, even though the expenses are higher (though still really good compared to other options).

The reason I got really interested in this was because of something I read in another thread, where I believe arebelspy advised the guy to buy VTSAX, and nothing else. Don't buy REIT's, gold, Google, etc. Just buy VTSAX and keep buying it; over time you will become very rich.

I have roughly 1 million in real estate (about half of that equity) and as real estate becomes less attractive with higher interest rates, I want to start diversifying with index funds. Looks like VTSAX it is for me. Thanks folks.

Jack

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #12 on: August 10, 2015, 06:10:08 PM »
That said, VTSAX has lower expenses than VTSMX, so why does MMM specifically recommend VTSMX alone on his blog, even though the expenses are higher (though still really good compared to other options).

Because nobody "chooses" between VTSMX and VTSAX. If you have between $3,000 and $10,000 to invest, you get VTSMX. If you have more than $10,000, you get VTSAX. Vanguard makes that decision, not you. In fact, if you have VTSMX and the balance grows beyond $10,000, Vanguard will automatically convert it to VTSAX sooner or later. (I suppose if you really wanted to insist, Vanguard might let you keep VTSMX with a balance significantly above $10,000... but the person you would have to talk to in order to make that happen would think you're an idiot.)

They're not different funds. They're different share classes of the same fund. It's like going to the grocery store: you look at an item that's available in regular quantity or bulk quantity, and notice that the bulk quantity is cheaper per unit. Does that mean the item must somehow be different? No! it's the same thing, just more efficient to buy in bulk and therefore cheaper. The argument you're trying to make is like noticing that the vanilla ice cream comes in both pints and quarts and then saying the pints must somehow be a different flavor.

It makes sense for MMM to recommend VTSMX because most people who need that advice are just starting out, and most people who are just starting out don't have $10,000 to put in all at once. Therefore, they would use VTSMX. He could have recommended "VTSMX, unless you have more than $10,000 in which case use VTSAX," but I would have considered that to be unnecessary detail... until reading this thread, at least.

lauren214

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #13 on: September 13, 2015, 04:51:35 PM »

As others mentioned, it's the same fund named "Total Stock Market Index" offered by Vanguard.

The options (or share classes) you can choose are:

Investor Shares, Symbol: VTSMX, Expense Ratio:  .17%, Minimum Investment:  $3k
Admiral Shares, Symbol:  VTSAX, Expense Ratio:  .05%, Minimum Investment:  $10k
Institutional Shares, Symbol:  VITSX, Expense Ratio:  .04%, Minimum Investment:  $5mil
Institutional Plus Shares, Symbol:  VSMPX, Expense Ratio:  .02%, Minimum Investment:  $100mil

Exchange Traded Fund (ETF), Symbol: VTI, Expense Ratio: .05%, Minimum Investment: Cost per share, you can buy a single share

Idiot question here, but vanguard's explanation on their website was confusing and Google isn't being helpful - is there a material difference between an etf (eg. VTI) and it's comparable index fund (eg. VSTMX/AX)? Like, why would someone buy VSTMX if they could get VTI for a lower expense ratio?

MDM

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Re: VTSMX returns higher than VTSAX and VTI?
« Reply #14 on: September 13, 2015, 05:02:24 PM »
Idiot question here, but vanguard's explanation on their website was confusing and Google isn't being helpful - is there a material difference between an etf (eg. VTI) and it's comparable index fund (eg. VSTMX/AX)? Like, why would someone buy VSTMX if they could get VTI for a lower expense ratio?
Actually it's a very good question.  See http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds for some answers.