Is the Vanguard total market index available in your 401(k) program?
My current index is Fidelity SpartanŽ Extnd Mkt Idx Advtg FSEVX
Is there another index that is performing better than this? anything you guys recommend i should switch to? It has to be an index.
Is the Vanguard total market index available in your 401(k) program?
Vanguard Total Stock Mkt Idx Inv (VTSMX) ??
I think FSEVX > VTSMX.
Last edited by lendarios; 02-25-2015 at 05:38 PM.
Looks like in the past 5 years returns have been a bit better for FSEVX. /shrug
You should be able to see the performance of all funds available to you directly through your 401(k) website or portal.
There's no reason you can't use more than one, and not having any international exposure is a mistake.
i've started on a good site here in australia called stockspot. they invest in a few ETF's and package them together. this is their current weighting depending on risk so you might want to look at something like this -
each package has a small basket of ETF's. they list them here - How do you select ETFs to invest in?
theres more listed, i just like using the snipping tool. maybe look at a spread like that for diversification instead of just jumping around chasing maximum yield?
Mewkus: All of those funds have a HUGE home bias. 19% in Australian shares when the Australian economy makes up only 2% of global GDP ($1.5tn of $72.6tn) is crazy. You should invest at most 5% in Australian stocks, as a small(!) home bias is justified by the currency exchange risk resulting from investments abroad. At the same time, if the Australian economy tanks, you're also more likely to lose your job -- at the same time as the value of your portfolio crashes. So there's some argument that you should not overweight at all. In practice, it doesn't make a huge difference, unless your overweighting 25-fold (as in the Topaz plan). It's actually worse than 25-fold if you look at just stocks, where 77% of them are invested in Australia. That overweights nearly 40-fold.
As for Spartan vs. VTSMX: they don't track the same index, so you wouldn't expect them to have the same return. The former invests in mid-cap firms (e.g. no Apple, Google), the latter invests in the whole market. If you buy into index investing as a philosophy (e.g. you can't predict which segments will do better in the future), then you'll want VTSMX. If you think mid-cap firms will do better than small-caps and large-caps, then you stick with Spartan.
Personally, I'm invested 50% in VTSMX and 50% in VGTSX, which is the total international stock index (or rather their ETF equivalents, as I'm holding them in taxable accounts). The US economy makes up about half of global GDP, while VGTSX covers (roughly) a representative sample of stocks of the remaining half of the world. That is, effectively, what a global stock index fund should look like under the assumption that you do not want to overweight or underweight any part of the world and any particular sector.
To reduce risk, if desired, you could add the VBMFX, which is the total bond market index, and the fairly new VTIBX (the international version of that). Bond markets outside of the US aren't quite as mature, especially for corporate bonds, so you probably want more US bonds than international... but I have no idea what a reasonable allocation would be for that, as I don't invest in them myself. if I had to ballpark it, I'd say 3:1 for US bonds. So, for example, a portfolio could look like: 40% VTSMX, 40% VGTSX, 15% VBMFX, 5% VTIBX. Who knows how much better you do than if you just had 20% in VBMFX and dropped international bonds... there's a reason the latter indices are pretty new and seem kinda small. For Vanguard, for example, VTIBX holds $32bn, compared to $141bn for the US-equivalent.
Last edited by Soriak; 02-28-2015 at 03:50 AM.
Thank you for the advice soriak. i understand your points and agree with what you say, however i am a long term individual investor of modest means, so my options and my capital base impose serious restrictions on the kinds of opportunities i can access.
in australia it is very difficult and prohibitively expensive to invest compared to the US. most retail traders / investors here are spending $30 a trade online with a major bank, and this only provides access to a tiny selection of ETF's and shares etc. you can't even short stocks without having to go through all sorts of margin lending based CFD bank accounts. it is a serious fucking hassle to get into the markets here (if you're a self taught pleb like me) and you'd be lucky to have access to any foreign markets at all. this stockspot thing is literally the only way i can access these sorts of products without a load of drama and a literal rape-train of fees.
my main point was to diversify in a range of ETF's if this is a 401k (we call it superannuation here) long term kind of scenario. the pics were mostly just to provide an example of what i think is a good philosophy for diversification. obviously after the ammo, gold, arable land and liquid cash components have been arranged
as for the home weighting, i am aware of that and that suits me fine. we are a tiny market compared to america so while its harder to eke out a living (or hit that big score), it is much more stable / predictable. i know the value of my local dollar in relation to the rest of the world and am happy to grind along with my local ASX200 as we are slowly absorbed by china over the next 30 odd years.
Last edited by mewkus; 02-28-2015 at 03:51 PM.
The problem is that such a market can also be very susceptible to external shocks that are completely outside your control. Consider the example of Switzerland and the Swiss Franc. With the Euro crisis and the crash of the Ruble, savers and investors alike rushed for the Franc. The Swiss National Bank had to intervene and establish a price floor for the exchange rate, which they've managed to defend for a couple years. However, toward the end of last year, SNB blew through about $100bn per month to keep that up and eventually had to pull back. Within minutes of the exchange rate dropping below the floor, the stock market crashed by 20% and the currency appreciated roughly the same. Markets (and the exchange rate) recovered substantially since, but this is the kind of situation that could spin completely out of control, and there isn't anything you can reasonably do about it -- and you certainly can't predict it.as for the home weighting, i am aware of that and that suits me fine. we are a tiny market compared to america so while its harder to eke out a living (or hit that big score), it is much more stable / predictable. i know the value of my local dollar in relation to the rest of the world and am happy to grind along with my local ASX200 as we are slowly absorbed by china over the next 30 odd years.
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