Is there a better index fund to own?

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Augustus
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Is there a better index fund to own?

Post by Augustus » Tue Oct 24, 2017 2:04 pm

I am not much of a stock person, much more focused on real estate. I've got an old IRA that is vanguard 500. With all the insanity brewing and an estimated 37% of the S&P 500's stock being managed passively, I'm wondering if I ought to switch to a different index fund?

I know the general advice is that index funds are flawed, but I don't know enough to confidently buy individual stocks. So my question is, is there a less risky index fund I could switch to? Any ideas? 37% dumb money freaks me out.

jacob
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Re: Is there a better index fund to own?

Post by jacob » Tue Oct 24, 2017 3:02 pm

Well, you can go larger (Russell3000) or smaller (DJIA), but that likely has the same issues. Luckily, for people like you (and my mom), there's Wellington, Windsor, and Wellesley. They're actively managed(*), but cost is low and performance is good. Maybe they'll give you peace of mind (for a small fee).

viewtopic.php?f=3&t=9377

(*) Isn't passive management an oxymoron?

Augustus
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Re: Is there a better index fund to own?

Post by Augustus » Tue Oct 24, 2017 3:13 pm

Thanks! I'm not sure if the IRA has the WWW option, but I will research. I was also thinking along the lines of at least decreasing the risk with a larger total market fund, I know it doesn't eliminate it, but decreasing is better than nothing.

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Tyler9000
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Re: Is there a better index fund to own?

Post by Tyler9000 » Tue Oct 24, 2017 3:32 pm

If you're looking for a single fund to set and forget, I'm personally a fan of VWINX. But if you're looking for a simple index fund strategy that you can manage yourself, try browsing these options: https://portfoliocharts.com/portfolios/

Most of them can be built on top of the S&P500 fund you already own while notably mitigating downside risk.

Augustus
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Re: Is there a better index fund to own?

Post by Augustus » Sat Oct 28, 2017 1:20 pm

Thanks to both of you! I need to research more and start managing my own picks, but I am short on time with a 2 year old and tons of work. Maybe some day...

I swapped my index funds for the wellington fund, I do have to say I was really lucky with the 500 index, 14% this year alone, I will happily take that and get out while the getting is good.

Stahlmann
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Re: Is there a better index fund to own?

Post by Stahlmann » Mon Jan 15, 2018 7:42 pm

I'll join in with diffrent problem.

The idea that most (or many) fund managers piggy back on SP500 hit me hard or other "stable" funds like mentioned in this topic.

I started to thinking if it's international idea.

I know my country takes 40% capital gains obtained in foreign country, but... Has any smart guys gone around this and offered this to "small guys"? I mean what kind of principle would they use?

I've got access to this:
https://stooq.com/q/?s=etfsp500.pl&c=1y&t=l&a=lg&b=0
but I'm hungry

IlliniDave
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Re: Is there a better index fund to own?

Post by IlliniDave » Tue Jan 16, 2018 11:40 am

I'm a fan of total market index funds and over the years have been (trying) to shift towards a combination of total-us and total ex-us to be my core equity stake. Tax-loss harvesting machinations have kept me from completely achieving that. I also have some E/M and small cap in addition to those for fun. Tyler's suggestion of Vanguard Wellesley is reasonable if fear of the stock market is keeping you up at night, or a bond index fund.

FWIW I'm on an informal glide path to less equity overall (but more overseas equity as a fraction of the total), and more bonds. Has nothing to do with indexing per se--if people weren't buying index funds they'd be buying other mutual funds or individual stocks so the upward pressure would still be there--it's a combination of valuations and proximity to retirement driving my switch in strategy.

The Old Man
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Re: Is there a better index fund to own?

Post by The Old Man » Tue Jan 16, 2018 7:27 pm

Why not a total world fund?
VTWSX (Vanguard Total World Stock Index)

liberty
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Re: Is there a better index fund to own?

Post by liberty » Sat May 12, 2018 2:26 pm

Why not just go all-in consumer staples and health care? (for a 100% equity buy-and-hold portfolio).

https://www.msci.com/documents/10199/04 ... 5e9fb13538
https://www.msci.com/documents/10199/c4 ... 3d3bb77ae6

Staples and health care have historically been among the best performing sectors, but have also had the lowest drawdowns and volatility. People don't skip the toothpaste because of a financial crisis. Staples went down only 23% while the market went down 41% in 2008.

NPV
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Re: Is there a better index fund to own?

Post by NPV » Sat May 12, 2018 5:18 pm

jacob wrote:
Tue Oct 24, 2017 3:02 pm
Well, you can go larger (Russell3000) or smaller (DJIA), but that likely has the same issues. Luckily, for people like you (and my mom), there's Wellington, Windsor, and Wellesley. They're actively managed(*), but cost is low and performance is good. Maybe they'll give you peace of mind (for a small fee).

viewtopic.php?f=3&t=9377

(*) Isn't passive management an oxymoron?
Probably I am missing something, but what's the point of owning them if over the (relatively) long run they seem to dramatically underperform S&P 500?
https://finance.yahoo.com/quote/VWNDX/c ... xsfQ%3D%3D

I do understand that the volatility is a lot lower, however assuming your horizon is 10-20+ years it does not seem to matter much...

liberty
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Re: Is there a better index fund to own?

Post by liberty » Sat May 12, 2018 7:01 pm

After FIRE it matters because you each year take out 3-4% of the initial amount. Before FIRE it doesn't matter except for the pain you feel when the market goes down. Imaging your portfolio goes down 50%. Must be quite painful. Maybe the Return on investment is not that good after all if you get depression and anxiety, and even worse: Sell at the bottom and never go back to the stock market.

On the other hand: No pain, no gain.

jacob
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Re: Is there a better index fund to own?

Post by jacob » Sun May 13, 2018 4:31 pm

@NPV - You're missing three points:

1) The OP asked for something less risky which in this context means less volatile.
2) 10-20 years is only a short time unless you plan to retire at age 70.
3) Returns since inception:
  • Windsor (1958): 11.38%
  • Wellesley (1970): 9.71%
  • Wellington (1929): 8.27%
  • S&P500: ~9-10% ?
I could also ask you in reverse: What's the point of owning S&P500 when in the long run it has dramatically underperformed Phillip Morris/Altria? https://www.fool.com/investing/general/ ... essfu.aspx

Answer: Same as above.

slowtraveler
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Re: Is there a better index fund to own?

Post by slowtraveler » Sun May 13, 2018 9:53 pm

@Jacob
Some of those tobacco companies have a scary amount of debt and the financials don't look particularly nice but I still the stigma. Currently, it is about defeating the addictive aspect but that has nothing to do with the social aspect. Moreover, E-cigs and vaporizers seem to be under development by many of them and I can't say tobacco is going away any time soon.

Do you honestly think tobacco returns will be anything like they have been in the past?*

@Augustus
Another vote in for Wellesley. Lower volatility than the S&P with a history of good returns that are likely to continue. It has the sector diversification I feel by far the most comfortable with of any mutual fund I've seen.

The SEC yield is over 3% now.

*I hold you in no way accountable for any of the information you post in response to this. I've been considering the big tobacco (and health and food) companies for a long time so my decisions made on any information are 100% my responsibility.

jacob
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Re: Is there a better index fund to own?

Post by jacob » Mon May 14, 2018 7:40 am

@st - No idea. My point was more to the effect that it's the [investment]-process (strategy) that matters, not simply on what the past returns were. Of course picking an investment based on recent outperformance is also a process and it falls under momentum-strategies.

Augustus
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Re: Is there a better index fund to own?

Post by Augustus » Thu Dec 20, 2018 1:35 pm

Happy to say that after switching to Wellington at the end of October 2017 my investment performance is at parity with the s&p 500 index that I switched from now that the s&p 500 has shed a lot of it's gains. It's outperforming the Russell 3000 by a tiny bit. I was feeling a little stupid watching the index fund continue to rise while Wellington lagged behind. Here's hoping that Wellington outperforms the index for the next few years and I end up ahead. I'm kind of tempted to alternate between Windsor when the market is low and wellington or Wellesley when the market is high.

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