WHY NOT USE VANGUARD TOTAL STOCK MARKET INSTEAD OF HAVING TO BUY BOTH THE S&P 500 AND EXTENDED MARKET INDEX FUNDS?
The reason is that the Total Stock Market Fund tracks the performance of the Wilshire 5000, which is typically weighted in such a way that the S&P 500 stocks represent a little more than 70% of the fund, and the remaining Wilshire 4,500 stocks count for slightly less than 30%. If you put, say, $10,000 into the Total Stock portfolio, it would be like investing $7,000 in the S&P 500 and $3,000 in the Wilshire 4500. However, the JtB formula calls for having equal amounts in each, meaning you would be underrepresented in the smaller companies by using Total Stock Market. There are times like the late 1990s when the emphasis on large companies has paid off. But there are also times, like the last three years, when small companies have outperformed large ones, and JtB would have the edge. It’s your call which allocation you prefer.
The reason is that the Total Stock Market Fund tracks the performance of the Wilshire 5000, which is typically weighted in such a way that the S&P 500 stocks represent a little more than 70% of the fund, and the remaining Wilshire 4,500 stocks count for slightly less than 30%. If you put, say, $10,000 into the Total Stock portfolio, it would be like investing $7,000 in the S&P 500 and $3,000 in the Wilshire 4500. However, the JtB formula calls for having equal amounts in each, meaning you would be underrepresented in the smaller companies by using Total Stock Market. There are times when the emphasis on large companies has paid off. But there are also times, when small companies have outperformed large ones, and JtB would have the edge. It’s your call which allocation you prefer.
