401k and the "censored" curve

[JeffKeryk]

The Schwab 1000 Index screens and ranks all U.S. stocks based on their market capitalization, or the total stock market value of their shares. It builds a portfolio containing the top 1000 stocks in proportion to their overall value.

I have had a little money in this since 1991. Nothing special.

 

[JHZR2]

The Schwab 1000 Index screens and ranks all U.S. stocks based on their market capitalization, or the total stock market value of their shares. It builds a portfolio containing the top 1000 stocks in proportion to their overall value.

I have had a little money in this since 1991. Nothing special.

Thanks for the lead!

case in point:

I guess if it just goes lower by market cap, not finding the “best of”, top “n” companies in each market cap range, it wouldn’t be much different from the 500.

I haven’t looked close enough if it actively added small cap and mid cap stocks on top of the S&P500.

I wonder if the S&P 500, plus, say, the top 250 mid cap and top 250 small cap funds would perform differently in the long run.

Gut is no, but these indexes are too big (maybe) to truly get the best of.

I’d think that the small and mid would have a greater chance of stagnant or dying companies and companies that are failed... meanwhile not having as much of a chance for dividends or anything else. So the question would be if the top 100 or 250 in each capitalization range do better. Notionally that’s where you’re seeing your best and as they’re growing/moving up.

 

[Wolf359]

I’ve never looked to see if there’s any benefit to some other index that includes a number of the others to be more diverse but pick the best percentage of each. Maybe some 1000-ish share index? But I’m sure if that was a thing that outperformed, it would be discussed as a competitor to the S&P 500 index.

About the only other index funds that get mentioned all the time is the Total Stock Market, but that is pretty similar to the S&P 500. The Nasdaq composite index fund FNCMX has been beating the S&P 500 pretty well lately, the 10 year return is several points better than the S&P 500 and doesn't vary too much from the S&P 500, usually a few points better, a couple years where it was worse but only by a couple points.

 

[gfh77665]

For a real "Total Stock Market" fund, go with VT.

Vanguard Total World Stock ETF, VT Quick Chart - (PSE) VT, Vanguard Total World Stock ETF Stock Price - BigCharts.com

VT - Vanguard Total World Stock ETF Basic Chart, Quote and financial news from the leading provider and award-winning BigCharts.com.

bigcharts.marketwatch.com

Many of the others are domestic stocks only. VT is a global Total Stock Market fund, so you get a proportional amount of international equity along with US equity. Note that many of the foriegn markets trade at much more reasonble PE ratios that the Dow or SP500 does, so long run you are buying in cheaper and the diversification is unmatched.

 

[SSerian]

Throw out your favorite small cap funds. I and looking to get out of individual stocks and just play funds. Tired of chasing individual stocks.

 

[Wolf359]

For a real "Total Stock Market" fund, go with VT.

Vanguard Total World Stock ETF, VT Quick Chart - (PSE) VT, Vanguard Total World Stock ETF Stock Price - BigCharts.com

VT - Vanguard Total World Stock ETF Basic Chart, Quote and financial news from the leading provider and award-winning BigCharts.com.

bigcharts.marketwatch.com

Many of the others are domestic stocks only. VT is a global Total Stock Market fund, so you get a proportional amount of international equity along with US equity. Note that many of the foriegn markets trade at much more reasonble PE ratios that the Dow or SP500 does, so long run you are buying in cheaper and the diversification is unmatched.

The only problem with international funds is that they've been dogs for years. And people have been saying that it's going to turn around for years. Meanwhile the US market keeps outpacing the international market. Reasonal PE ratios don't mean anything if they always stay reasonable. Sure you can buy things cheap, but you'll never make any money if they always stay cheap. The point is to buy it cheap and you make money when they're no longer cheap. That hasn't been happening lately. Sure you can make money chasing the next great thing. But you can also lose money. I just find I've made more money sticking with solid US funds than by trying to chase the next great thing.

 

[Dave Hess]

Yep. I’ve never invested in international funds because they trail the S&P 500.

 

[Vikas]

Just an anecdote:- "The boss" forced me to go through all the old investment paper record and shred them. I was shocked to see the 2008 massacre. The best thing was I most likely did NOT even look at them at that time. All the investments have been on autopilot once I got massively burnt in 2000 era and tried to play with my 401K money on internet stocks.

I tell my sons the same. Just put it on autopilot, max it and don't look at for decades.

 

[gfh77665]

The only problem with international funds is that they've been dogs for years. And people have been saying that it's going to turn around for years. Meanwhile the US market keeps outpacing the international market. Reasonal PE ratios don't mean anything if they always stay reasonable. Sure you can buy things cheap, but you'll never make any money if they always stay cheap. The point is to buy it cheap and you make money when they're no longer cheap. That hasn't been happening lately.

I agree with you that the international markets have trailed the US. Thats exactly why investors should have an international component in their portfolios. The fact they have "been dogs for years" is exactly why I want to buy them. I disagree with you thinking that the international markets will always stay down. Just when someone thinks something will never turn around, thats usually when it does. Look at the demographics of the world markets vs. the US. Young growing nations will outperform in the future more so than the US. We have a relatively mature population and the little bit of growth we do have is uneducated immigrants coming north.

VT has 56.45% of the fund in US stocks, so only 43.55 % of it is international. Outstanding diversifacation is a great thing. VT is an excellent fund to buy and hold.

 

[Wolf359]

I agree with you that the international markets have trailed the US. Thats exactly why investors should have an international component in their portfolios. The fact they have "been dogs for years" is exactly why I want to buy them. I disagree with you thinking that the international markets will always stay down. Just when someone thinks something will never turn around, thats usually when it does. Look at the demographics of the world markets vs. the US. Young growing nations will outperform in the future more so than the US. We have a relatively mature population and the little bit of growth we do have is uneducated immigrants coming north.

VT has 56.45% of the fund in US stocks, so only 43.55 % of it is international. Outstanding diversification is a great thing. VT is an excellent fund to buy and hold.

That is the theory that they always put out. But just look at the performance for the last 10 years. It was about 8%, the 5 year is also 8.5%. But if you look at the S&P 500, you're at 13.73% over 10 years and 14.14% over 5 years. So you under performed the S&P by over 5% on average every year. You would have to overperform more than 5% over the next 10 years in order to make up for those losses. Basically my previous analysis was that yes, when they underperform, they eventually overperform at one point. However they don't keep it up and it's not enough to make up for the years of underperformance. I do not think they will always stay down, they just won't outperform long enough to make it worth while to hold it. And if you're following it that closely, you can always jump back in once they start to do better. That still hasn't happened yet.

But thanks for this discussion, I've been getting rusty and haven't been following other things besides the S&P 500, the most recent research doesn't really dissuade me from what I'm currently doing.

 

[gfh77665]

I try to achieve the best of both worlds. I hold onto my high flying US stocks, letting them run, while my new money goes into lower priced interational equity. RERGX.

EuroPacific Growth Fund - R-6 | American Funds

EuroPacific Growth Fund (Class R-6 | Fund 2616 | RERGX) seeks to provide long-term growth of capital.

www.capitalgroup.com

 

[Wolf359]

I try to achieve the best of both worlds. I hold onto my high flying US stocks, letting them run, while my new money goes into lower priced interational equity. RERGX.

You'll have to elaborate on what the other world is.

The point of investing is for returns, not for diversification. Diversification is to reduce your risks. There's also risk in investing in low performing funds with the hopes they become high performing. In that instance, you're basically gambling that you're picking a future winner and you're actually spotting a trend before someone else. I'm not saying the S&P 500 is the best. Just that it's a decent bet. You basically guarantee that you'll do 75% (or whatever the current number is) better than most fund mangers. While it's not 100%, by not picking it, there's a 75% chance you'll be wrong and failure is a real option and has real consequences.

 

[SSerian]

Considering playing the Proshares funds. Some of them are 3x leveraged. I am beating the S&P by 15% through the economic recovery.

 

[Dave Hess]

Considering playing the Proshares funds. Some of them are 3x leveraged. I am beating the S&P by 15% through the economic recovery.

I made a very nice gains with 3X technology ETFs during the 10 year bull run and recent market hit earlier this year.

To win big.... you have to bet big.

Just know leveraged ETFs can be VERY risky if you get greedy.

.

 

[PimTac]

I made a very nice gains with 3X technology ETFs during the 10 year bull run and recent market hit earlier this year.

To win big.... you have to bet big.

Just know leveraged ETFs can be VERY risky if you get greedy.

.

First, investing is not a competition. I don’t care if my neighbor had a 40% gain in his portfolio while I only had a 20% gain.

Leveraged ETFs are a useful tool in a portfolio but only if the individual investor knows exactly what they are and what the consequences are if the markets tumble.

 

[gfh77665]

You'll have to elaborate on what the other world is.

I was trying to say I still ride the US performance up, up and away, but I attempt to buy in with new money at a lower entry points through RERGX at the same time.

Do note the international component of my portfolio is small, maybe 25%, but I do like the diversification it provides. Most pros strongly advocate for some diversification.

I may very well be wrong though. I don't claim to know all the answers. You will probably far surpass my returns in the years ahead. Congrats to you.

 

[Wolf359]

I was trying to say I still ride the US performance up, up and away, but I attempt to buy in with new money at a lower entry points through RERGX at the same time.

Do note the international component of my portfolio is small, maybe 25%, but I do like the diversification it provides. Most pros strongly advocate for some diversification.

I may very well be wrong though. I don't claim to know all the answers. You will probably far surpass my returns in the years ahead. Congrats to you.

I only point it out because the pros told me the same thing. I had a Fidelity Porfolio advisory service also at one point. They basically under performed one of my non managed account and all I had in it was the S&P 500 and Fidelity Contrafund and I did nothing with it while the whole time they had it, they bought and sold funds all the time including international funds. They under performed severely so I got rid of them.

They basically advocate for diversification because it lowers the risk, maybe you get higher returns. In reality I found it to be the opposite of what they said, it did badly even in a down market, sometimes worse and performance wasn't as good even in an up market. So the worst of both worlds. The theory was that although it didn't perform as well in an up market, it'd protect you in a down market. Never saw that part happen.

 

[Dave Hess]

First, investing is not a competition. I don’t care if my neighbor had a 40% gain in his portfolio while I only had a 20% gain.

Leveraged ETFs are a useful tool in a portfolio but only if the individual investor knows exactly what they are and what the consequences are if the markets tumble.

I agree investing is not a competition, I also don’t care if someone is up 150% like that guy on here that posted his Robinhood screenshot of his account a few months ago. I forget the guy’s screen name, some might remember him.

I‘ve talked about leveraged ETFs because I had a few 2X and 3X ETFs. I never tell anyone to put money into them because they are very risky. If I can make substantially more gains in a 3X leveraged technology ETF compared to a basic S&P 500.... I will definitely take advantage and have ____ percentage of my portfolio in these investments.

Nothing wrong with taking on some additional risk and simply riding the wave up (for a short timeframe). The key is not to get greedy and expect these leveraged ETFs / mutual funds to keep going up and up.

My investment style is obviously different from your‘s. I don’t mind paying short term capital gains taxes verses buying and holding an S&P 500 fund for 30 years.

 

[SSerian]

I agree investing is not a competition, I also don’t care if someone is up 150% like that guy on here that posted his Robinhood screenshot of his account a few months ago. I forget the guy’s screen name, some might remember him.

I‘ve talked about leveraged ETFs because I had a few 2X and 3X ETFs. I never tell anyone to put money into them because they are very risky. If I can make substantially more gains in a 3X leveraged technology ETF compared to a basic S&P 500.... I will definitely take advantage and have ____ percentage of my portfolio in these investments.

Nothing wrong with taking on some additional risk and simply riding the wave up (for a short timeframe). The key is not to get greedy and expect these leveraged ETFs / mutual funds to keep going up and up.

My investment style is obviously different from your‘s. I don’t mind paying short term capital gains taxes verses buying and holding an S&P 500 fund for 30 years.

totally agree.
When the market tumbled earlier this year, I moved money into the 3x leveraged short funds to make a little while on the way down. If it wasn’t for that, I wouldn’t have made as much this year. It seems like I’ve been chasing everything on the way back up though and I’ve made gains and lost them.

 

[PimTac]

totally agree.
When the market tumbled earlier this year, I moved money into the 3x leveraged short funds to make a little while on the way down. If it wasn’t for that, I wouldn’t have made as much this year. It seems like I’ve been chasing everything on the way back up though and I’ve made gains and lost them.

You are likely not the only investor that has been caught in the whiplash movements of the markets.